Court Opinion

ID: 4050921
Source: CourtListenerOpinion
Date Created: 2016-09-29 01:24:49.605017+00
Date Added: 2024-06-11T14:30:34.204054
License: Public Domain

ACCEPTED
                                                                                 04-15-00228-CV
                                                                      FOURTH COURT OF APPEALS
                                                                           SAN ANTONIO, TEXAS
                                                                            4/14/2015 3:19:56 PM
                                                                                   KEITH HOTTLE
                                                                                          CLERK

                  ORAL ARGUMENT REQUESTED
                              04-15-00228-CV
                        No. __________________            FILED IN
                                                   4th COURT OF APPEALS
                                                    SAN ANTONIO, TEXAS
                    IN THE COURT OF APPEALS        4/14/2015 3:19:56 PM
  FOR THE   FOURTH DISTRICT OF TEXAS AT SAN ANTONIO, KEITH E.TEXAS
                                                               HOTTLE
             _________________________________________     Clerk

   STEWART TITLE GUARANTY COMPANY, Defendant-Appellant
                             v.
VANTAGE BANK TEXAS, SUCCESSOR BY MERGER TO D’HANIS STATE
         BANK, and BANPROP, L.L.C., Plaintiffs-Appellees
          _______________________________________

  On Appeal from the 150th Judicial District Court of Bexar County, Texas
                        Cause No. 2013-CI-14899
                       (Honorable Laura Salinas)
            _________________________________________

 APPELLANT’S PETITION FOR PERMISSION TO APPEAL AMENDED
 ORDER GRANTING PLAINTIFFS’ SECOND MOTION FOR PARTIAL
SUMMARY JUDGMENT AND DENYING DEFENDANT’S MOTION FOR
  SUMMARY JUDGMENT AND GRANTING DEFENDANT’S MOTION
    FOR PERMISSION TO APPEAL AND TO STAY PROCEEDINGS
                       PENDING APPEAL
            _______________________________________

                                      I. Clay Rogers
                                      State Bar No. 17172150
                                      crogers@morganlewis.com
                                      Ankita Puri
                                      State Bar No. 24074920
                                      ankita.puri@morganlewis.com
                                      MORGAN, LEWIS & BOCKIUS LLP
                                      1000 Louisiana Street, Suite 4000
                                      Houston, Texas 77002
                                      T: (713) 890-5000
                                      F: (713) 890-5001
                                      Counsel for Defendant-Appellant
                                      Stewart Title Guaranty Company
                 IDENTITY OF PARTIES AND COUNSEL

Stewart Title Guaranty Company                            Defendant-Appellant

Vantage Bank, Successor by Merger                          Plaintiffs-Appellees
to D’Hanis State Bank, and Banprop, L.L.C.

                  Appellate and Trial Counsel for Appellant

I. Clay Rogers                                 Appellate Counsel for Appellant
Ankita Puri
MORGAN, LEWIS & BOCKIUS LLP
1000 Louisiana Street, Suite 4000
Houston, Texas 77002

Scott R. Breitenwischer                             Trial Counsel for Appellant
Andrew Nash
ROYSTON, RAYZOR,
VICKERY & WILLIAMS, LLP
711 Louisiana Street, Suite 500
Houston, Texas 77002

                  Appellate and Trial Counsel for Appellees

David B. West                         Appellate and Trial Counsel for Appellees
David Vanderhider
COX SMITH MATTHEWS, INC.
112 E. Pecan Street, Suite 1800
San Antonio, Texas 78205

                                      ii
                                         TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL ........................................................... ii

TABLE OF AUTHORITIES .....................................................................................v

STATEMENT OF THE CASE.............................................................................. viii

COMPLIANCE WITH TEXAS RULES OF APPELLATE PROCEDURE
28.3(e)(1), 25.1(d)......................................................................................................x

STATEMENT OF THE JURISDICTION............................................................... xi

ISSUE PRESENTED............................................................................................... xi

STATEMENT OF FACTS ........................................................................................1

STANDARD OF REVIEW .......................................................................................4

SUMMARY OF THE ARGUMENT ........................................................................4

ARGUMENT AND AUTHORITIES........................................................................5

         I.       THE COURT SHOULD ACCEPT THE APPEAL UNDER
                  SECTION 51.014 OF THE TEXAS CIVIL PRACTICE AND
                  REMEDIES CODE ...............................................................................5

                  A.        This appeal meets the standards for permissive interlocutory
                            appeals under section 51.014(d). ................................................6

                  B.        The Amended Order appealed involves a controlling question
                            of law to which there is substantial ground for difference of
                            opinion and immediate appeal will materially advance the
                            ultimate termination of the litigation. .........................................7

         II.      COVERAGE IS PREDICATED ON THE POLICY, STATE
                  STATUTES AND COMMON LAW.................................................. 8

                  A.        The Policy requires the February Notice to be filed in records
                            established by state statutes. .......................................................8
                                                           iii
                  B.        The state statutes and City ordinance require the February
                            Notice identify the proper owner. ...............................................9

                  C.        Texas common law does not impart constructive notice under
                            these circumstances...................................................................10

                  D.        The City issued two notices that did not constitute constructive
                            notice to a purchaser as required under the Policy, state statutes,
                            City ordinance, or common law................................................12

                            1.       The January Notice was defectively filed by the City....12

                            2.       The February Notice was also defective pursuant to the
                                     Policy, applicable state statutes, City ordinance, and
                                     Texas case law. ...............................................................13

                  E.        Plaintiffs erroneously argue that the state statutes do not apply
                            to the Policy. .............................................................................14

PRAYER ..................................................................................................................18

CERTIFICATE OF COMPLIANCE.......................................................................20

CERTIFICATE OF SERVICE ................................................................................21

APPENDIX TO APPELLANT’S UNOPPOSED PETITION FOR PERMISSION
TO APPEAL AMENDED ORDER GRANTING PLAINTIFFS’ SECOND
MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING
DEFENDANT’S MOTION FOR SUMMARY JUDGMENT AND GRANTING
DEFENDANT’S MOTION FOR PERMISSION TO APPEAL AND TO STAY
PROCEEDINGS PENDING APPEAL ...................................................................22

                                                            iv
                                  TABLE OF AUTHORITIES

                                                                                                  Page(s)
CASES
Certain Underwriters at Lloyd’s of London Subscribing to Policy Number:
  £FINFR0901509 v. Cardtronics, Inc.,
  438 S.W.3d 770 (Tex. App.—Houston [1st Dist.] 2014, no pet.)........................8

Chicago Title Ins. Co. v. McDaniel,
  875 S.W.2d 310 (Tex. 1994) ..............................................................................17

City of San Antonio v. D’Hanis State Bank,
   No. 04-10-00181-CV, 2010 WL 3249956 (Tex. App.—San Antonio,
   Aug. 18, 2010, no pet.) (mem. op.).................................................................2, 13

Coker v. Coker,
  650 S.W.2d 391(Tex. 1983)................................................................................16

First S. Props., Inc. v. Vallone,
    533 S.W.2d 339, 340 (Tex. 1976) .....................................................................12

Gross v. Innes,
  988 S.W.2d 727 (Tex. 1998) (per curiam) ...........................................................6

Gulf Coast Asphalt Co. v. Lloyd,
  __ S.W.3d __, No. 14-13-00991-CV, 2015 WL 393407 (Tex. App.—
  Houston [14th Dist.] January 29, 2015, no pet.)...................................................7

Gulley v. State Farm Lloyds,
  350 S.W.3d 204 (Tex. App.—San Antonio 2011, no pet.) ..................................6

Hebert v. JJT Constr.,
  438 S.W.3d 139 (Tex. App.—Houston [14th Dist.] 2014, no pet.) .................6, 7
Jones v. P.A.W.N. Enters.,
   988 S.W.2d 812 (Tex. App.—Amarillo 1999, pet. denied) ...............................12

Lone Star Gas Co. v. Sheaner,
  305 S.W.2d 150 (Tex. 1957) ..............................................................................11

                                                     v
Martinka v. Commw. Land Title Ins. Co.,
  836 S.W.2d 773 (Tex. App.—Houston [1st Dist.] 1992, writ denied)......... 17-18

Noble Mortg. & Invs. LLC v. D&M Vision Invs., LLC,
  340 S.W.3d 65 (Tex. App.—Houston [1st Dist.] 2011, no pet.)........................11

Ogden v. Dickinson State Bank,
  662 S.W.2d 330 (Tex. 1983) ..............................................................................16

Safeco Lloyds Ins. Co. v. Allstate Ins. Co.,
   308 S.W.3d 49 (Tex. App.—San Antonio 2009, no pet.) ....................................4

Sanchez v. Telles,
   960 S.W.2d 762 (Tex. App.—El Paso 1997, pet. denied)..................................11

State Farm Lloyds v. Gulley,
   399 S.W.3d 242 (Tex. App.—San Antonio 2012, no pet.) ................................16

Stewart Title Guar. Co. v. Cheatham,
   764 S.W.2d 315 (Tex. App.—Texarkana 1988, writ denied) ............................18

Sw. Props., L.P. v. Lite-Dec of Tex., Inc.,
  989 S.W.2d 69 (Tex. App.—San Antonio 1998, pet. denied)..............................4

Sw. Title Ins. Co. v. Woods,
  449 S.W.2d 773 (Tex. 1970) ..............................................................................11

Tamburine v. Ctr Sav. Ass’n,
  583 S.W.2d 942 (Tex. Civ. App.—Tyler 1979, writ ref’d n.r.e.).......................17

Wilson v. Dvorak,
   228 S.W.3d 228 (Tex. App.—San Antonio 2007, pet. denied)..........................12

RULES
San Antonio, Tex. Code of Ordinances ch. 6, art. VIII, § 6-162(b)(1-2)
   (2014)..................................................................................................................10

TEX. CIV. PRAC. & REM. CODE § 51.014(d)...............................................................6

TEX. CIV. PRAC. & REM. CODE § 51.014(f)................................................................7

TEX. INS. CODE § 2703.001........................................................................................8

                                                             vi
TEX. LOC. GOV’T CODE § 193.003(a) ......................................................................10

TEX. LOC. GOV’T CODE § 193.003(b) ......................................................................10

TEX. LOC. GOV’T CODE § 214.001(e)..................................................9-10, 13, 16-17

TEX. PROP. CODE § 13.002...................................................................................9, 13

TEX. R. APP. P. 28.3(e)(1) ..........................................................................................x

TEX. R. APP. P. 25.1(d)...............................................................................................x

TEX. R. APP. P. 28.3(k)...............................................................................................x

OTHER AUTHORITY
BLACK’S LAW DICTIONARY 278 (10th ed. 2014) .....................................................11

                                                         vii
                      STATEMENT OF THE CASE

Nature of the Case:       The underlying proceeding brought by Vantage
                          Bank Texas, Successor by Merger to D’Hanis
                          State Bank, and Banprop, L.L.C. (“Plaintiffs”)
                          against Stewart Title Guaranty Company
                          (“Stewart”) alleges the failure to honor a loan
                          policy of title insurance issued to them by Stewart
                          (“Policy”).     Plaintiffs complain they suffered
                          losses covered by the Policy that arose out of the
                          City of San Antonio’s (“City’s”) efforts to enforce
                          a nuisance ordinance by demolishing buildings on
                          the land that secured a loan made by Plaintiffs.
                          Stewart contends that this loss is not covered
                          because no notice of the City’s efforts to demolish
                          the buildings was filed in the “Public Records” as
                          defined in the Policy.

                          One of the pivotal issues that determines coverage
                          is whether the City’s February 2008 demolition
                          notice of hearing (“February Notice”) was
                          properly “recorded in the Public Records” as
                          defined by the Policy and in conformity with
                          applicable Texas law. The February Notice
                          referenced and was issued to strangers to the
                          property—identifying two incorrect owners and
                          the wrong property address. These facts are
                          undisputed. If the February Notice constitutes
                          notice in the Public Records and follows state
                          statutes, then it falls within the coverage of the
                          Policy. However, that is not the case here.

                          Plaintiffs filed a summary judgment motion on the
                          coverage issues, claiming that the loss is covered
                          because the February Notice was recorded in the
                          Public Records as defined in the Policy. Stewart
                          filed a cross-motion, asserting that the February
                          Notice was not filed in the Public Records so as to
                          constitute constructive notice to a purchaser of the
                          property, and thus, there is no coverage for the
                                  viii
                             Plaintiffs’ claims.

                             Judge Salinas granted Plaintiffs’ motion and
                             denied Stewart’s, finding that the Policy covered
                             Plaintiffs’ alleged losses. Judge Salinas’s holding
                             was predicated on the finding that the February
                             Notice was filed in the Public Records so as to
                             constitute constructive notice to a purchaser of the
                             property.

                             Stewart filed a Motion to Permit Interlocutory
                             Appeal and Request for Stay Pending Appeal.
                             Plaintiffs did not oppose this request. On March
                             31, 2015, the trial court signed an agreed Amended
                             Order Granting Plaintiffs’ Second Motion for
                             Partial Summary Judgment and Denying
                             Defendant’s Motion for Summary Judgment and
                             Granting Defendant’s Motion for Permission to
                             Appeal and to Stay Proceedings Pending Appeal
                             (the “Amended Order”) (Apx. A). Stewart now
                             files this Petition for Permission to Appeal the
                             Amended Order.

Trial Court:                 The Honorable Judge Laura Salinas, 150th District
                             Court, Bexar County, Texas.

Trial Court’s Disposition:   March 31, 2015 Amended Order Granting
                             Plaintiffs’ Second Motion for Partial Summary
                             Judgment and Denying Defendant’s Second
                             Motion for Summary Judgment and Granting
                             Defendant’s Motion for Permission to Appeal and
                             to Stay Proceedings Pending Appeal

Parties in Court of Appeals: Stewart Title Guaranty Company—Appellant;
                             Vantage Bank Texas, Successor by Merger to
                             D’Hanis State Bank, and Banprop, L.L.C.—
                             Appellees.

                                      ix
  COMPLIANCE WITH TEXAS RULES OF APPELLATE PROCEDURE
                     28.3(e)(1), 25.1(d)

      Stewart provides the following information as required by Texas Rule of

Appellate Procedure 25.1(d). See TEX. R. APP. P. 28.3(e)(1); see also TEX. R. APP.

P. 25.1(d).

      1.      The trial court and trial court number and style: Vantage Bank Texas,

Successor by Merger to D’Hanis State Bank, and Banprop, L.L.C., Plaintiffs v.

Stewart Title Guaranty Company, Defendant, Cause No. 2013-CI-14899, in the

150th District Court of Bexar County, Texas.

      2.      The order being appealed is the March 31, 2015 Amended Order

Granting Plaintiffs’ Second Motion for Partial Summary Judgment and Denying

Defendant’s Second Motion for Summary Judgment and Granting Defendant’s

Motion for Permission to Appeal and to Stay Proceedings Pending Appeal.

      3.      Appellant Stewart is filing this Petition and desires to appeal the

Amended Order.

      4.      The court to which the appeal is taken is the Court of Appeals for the

Fourth District of Texas, at San Antonio, Texas.

      5.      If this Petition is granted, the appeal will be governed by the rules for

accelerated appeals. TEX. R. APP. P. 28.3(k).

                                           x
                          STATEMENT OF THE JURISDICTION
        This Court has jurisdiction pursuant to section 51.014(d) of the Texas Civil

Practice and Remedies Code. The trial court signed the Amended Order permitting

interlocutory appeal on the basis that (1) the order involves a controlling question

of law as to which there is substantial ground for difference of opinion, and (2) an

immediate appeal from the order may materially advance the ultimate termination

of the litigation.

                                   ISSUE PRESENTED

        The trial court’s Amended Order involves the following controlling question

of law as to which there is substantial ground for difference of opinion, justifying

immediate appeal under section 51.014(d) of the Civil Practice and Remedies

Code:

               Whether the City’s February Notice was “recorded in the
               Public Records” as the term “Public Records” is defined
               in the Policy.1

        Resolution of this issue will determine whether a purchaser of the property

would have had constructive notice of the information contained in the February

Notice and whether Plaintiffs’ claims would be covered based on that notice.

1
  Stewart reserves the right to present additional briefing on the issue presented if the Court so
requests.
                                                xi
                                STATEMENT OF FACTS

       Plaintiffs sued for breach of contract,2 claiming that Stewart breached its

duty to indemnify them for losses arising from the City’s efforts to enforce a

nuisance ordinance by demolishing buildings on the land that secured a loan the

Plaintiffs made. Plaintiffs claim that the City’s two notices were filed in the Public

Records and are covered by the Policy. Stewart contends neither notice was

properly recorded in the Public Records so as to constitute constructive notice to a

purchaser of the property and as such, there is no coverage under the Policy.

       Prior to the issuance of the Policy, the City issued two defective notices of

demolition for apartments located on the property. The first defective notice was

issued on January 2, 2008 (“January Notice”) (Apx. B). The January Notice

concerned a notice of hearing to determine if the apartments on the land at issue

constituted a public nuisance in need of abatement. The January Notice identified

the correct property owners in the chain of title but was not recorded in the Official

Public Records of Real Property in Bexar County. In a separate lawsuit between

the City and Plaintiffs, Plaintiffs denied that the January Notice was constructive

notice as to them because it was not properly recorded. This Court previously held

that the January Notice did not bind Plaintiffs and was not constructive notice to
2
 On February 4, 2015, Plaintiffs added additional claims for breach of duty of good faith and fair
dealing and for violations of Chapter 541 of the Texas Insurance Code. See Plaintiffs’ Third
Amended Original Petition ¶¶ 44–49 (Apx. J). Those additional claims are wholly derivative of
the claim for breach of contract, and as such, the viability of those claims is contingent upon
Plaintiffs’ showing that Stewart is liable for breach of contract.
them because the City did not properly record the January Notice in the Official

Public Records of Real Property in Bexar County. See City of San Antonio v.

D’Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956 at *3 (Tex. App.—

San Antonio, Aug. 18, 2010, no pet.) (mem. op.) (Apx. C).

      The second notice of hearing is the February 2008 Notice.           Stewart

maintains that the February Notice was also defective as it failed to identify the

correct property owner, and instead identified not one but two separate and wrong

property owners (complete strangers) at the wrong property address (Apx. D).

      The parties filed cross motions for summary judgment on the coverage issue.

This first round of cross motions concerned only the impact of the January Notice.

It is undisputed that the January Notice was never properly filed in the Official

Public Records of Real Property of Bexar County as required by the applicable

statutes. On October 20, 2014, Judge Price denied both parties’ motions for

summary judgment (Apx. E).

      In December 2014, the parties filed a second round of cross motions for

summary judgment on the coverage issue, this time focusing on the impact of only

the February Notice.    On January 30, 2015, Judge Salinas granted Plaintiffs’

motion and denied Stewart’s (Apx. F).        By holding that the Policy covered

Plaintiffs’ alleged losses, Judge Salinas implicitly found that the defective

February Notice provided constructive notice to purchasers of the property.

                                       -2-
Stewart respectfully believes Judge Salinas’s order is wrong on a pivotal legal

issue—whether the defective February Notice encumbered the property and

provided constructive notice to the world of the notice of demolition.

       The defective February Notice simply does not and cannot constitute

constructive notice to purchasers of the property. Correctly filed notices in the

Official Public Records of Real Property in Bexar County (where the property is

located) impose constructive notice. But, a document filed with an incorrect

grantor or grantee—such as the February Notice—is not in the chain of title and

thus would not constitute constructive notice. Plaintiffs do not dispute that the

February Notice would not be discovered by a search of Bexar County’s real

property grantor-grantee index.3

       Coverage under the particular covered risks at issue exists only if a proper

notice setting forth the City’s intended action and describing the land “is recorded

in the Public Records” (Apx. G, p. 2). The precise issue is whether the City’s

February Notice was “recorded in the Public Records” as the term “Public

Records” is defined in the Policy and as required by statute. The Policy defines

3
  Interestingly, the City acknowledged the errors in the January Notice and February Notice and
ultimately issued a third notice to Plaintiffs on October 13, 2011 (Apx. K). The third notice was
correct in form, containing none of the defects in the prior notices. Plaintiffs did not challenge
the City’s third notice of hearing to determine if the structure constituted a public nuisance in
need of abatement and Plaintiffs entered into a demolition and abatement agreement with the
City. The third notice was provided to Plaintiffs more than two years after the Policy was
effective and thus is irrelevant to coverage in this case, except to the extent it demonstrates the
prior notices were defective.
                                               -3-
“Public Records” as “records established under state statutes at Date of Policy

for the purpose of imparting constructive notice of matters relating to real

property to purchasers for value and without Knowledge” (Apx. G, p. 3).

                            STANDARD OF REVIEW

      The grant or denial of summary judgment is reviewed de novo, using well-

settled summary judgment standards. Safeco Lloyds Ins. Co. v. Allstate Ins. Co.,

308 S.W.3d 49, 52 (Tex. App.—San Antonio 2009, no pet.).                 In addition,

interpretation of a statute is a question of law that is reviewed de novo. Sw. Props.,

L.P. v. Lite-Dec of Tex., Inc., 989 S.W.2d 69, 70 (Tex. App.—San Antonio 1998,

pet. denied). Thus, all issues raised by this appeal are reviewed de novo, without

any deference to the trial court’s rulings.

                       SUMMARY OF THE ARGUMENT

      This Court should accept Stewart’s appeal. As the trial court and Plaintiffs

have already recognized, this is a controlling issue of law on which there are

substantial grounds for difference of opinion, and an immediate appeal will

materially advance the ultimate termination of the litigation.

      The controlling issue of law concerns whether the City’s defective February

Notice is considered recorded in the “Public Records” as such term is defined by

the Policy, as required by the Texas Department of Insurance Title Policy Form T-

2, the Texas Government Code and by the Texas Code of Ordinance. Further,

                                          -4-
even if such defective notice were considered properly filed in the “Public

Records,” is such notice, which entirely fails to identify the correct grantor, grantee

and property address, considered constructive notice to a purchaser of the property

for purposes of identifying encumbrances on the insured property?

      If the Court finds that the February Notice at issue was defective and did not

constitute constructive notice to a purchaser of the property by way of inaccurate

information, then the loss is not covered on that basis.         As Plaintiffs agree,

resolution of this issue will materially advance the termination of this litigation.

Thus, this Court should accept the appeal so that time, energy, and resources are

not unnecessarily spent by the litigants and the courts in proceeding through trial

based on an issue that may control its outcome, only to have judgment

subsequently reversed on appeal.

                       ARGUMENT AND AUTHORITIES

I.    THE COURT SHOULD ACCEPT THE APPEAL UNDER SECTION
      51.014 OF THE TEXAS CIVIL PRACTICE AND REMEDIES CODE
      This Court should accept Stewart’s appeal pursuant to sections 51.014(d)

and (f) of the Civil Practice and Remedies Code. The trial court’s Amended Order

involved a controlling question of law regarding a mandatory prerequisite to

coverage under the Policy—whether the notices were properly filed to constitute

constructive notice to a purchaser of the property. There are substantial grounds

for difference of opinion on this issue, and its resolution will materially advance

                                          -5-
the ultimate termination of the litigation because, if Stewart is correct, Plaintiffs’

claim would not be covered based on the February Notice.

      A.     This appeal meets the standards for permissive interlocutory
             appeals under section 51.014(d).
      An interlocutory order that does not dispose of all issues against all parties is

not immediately appealable, except in situations expressly authorized by statute.

Gulley v. State Farm Lloyds, 350 S.W.3d 204, 206 (Tex. App.—San Antonio 2011,

no pet.) (citing Gross v. Innes, 988 S.W.2d 727, 729 (Tex. 1998) (per curiam)).

Texas Civil Practice and Remedies Code § 51.014(d) provides as follows:

            (d)    On a party’s motion or on its own initiative, a trial
                   court in a civil action may, by written order, permit an
                   appeal from an order that is not otherwise appealable
                   if:

                   (1)    the order to be appealed involves a controlling
                          question of law as to which there is a
                          substantial ground for difference of opinion;
                          and

                   (2)    an immediate appeal from the order may
                          materially advance the ultimate termination of
                          the litigation.

TEX. CIV. PRAC. & REM. CODE § 51.014(d).

To satisfy these requirements, a trial court must issue a written order that includes

both the interlocutory order and a statement of the trial court’s permission to

appeal the order under section 51.014(d). Hebert v. JJT Constr., 438 S.W.3d 139,

141 (Tex. App.—Houston [14th Dist.] 2014, no pet.).             In the statement of

                                         -6-
permission, the trial court must identify the controlling question of law as to which

there is a substantial ground for difference of opinion and must state why an

immediate appeal may materially advance the ultimate termination of the litigation.

Id. The court of appeals may then accept an appeal. See TEX. CIV. PRAC. & REM.

CODE § 51.014(f).

      B.     The Amended Order appealed involves a controlling question of
             law to which there is substantial ground for difference of opinion
             and immediate appeal will materially advance the ultimate
             termination of the litigation.
      As is mandated by section 51.014(d), the trial court’s Amended Order on the

parties’ dueling summary judgment motions involves a controlling question of law

as to which there is a substantial ground for difference of opinion—whether the

February Notice was “recorded in the Public Records” as the term “Public

Records” is defined by the Policy.

      This Court’s ruling on that question is controlling because it determines

whether Plaintiffs may prevail on their claim of breach of the Policy based on the

February Notice. See Gulf Coast Asphalt Co. v. Lloyd, __ S.W.3d __, No. 14-13-

00991-CV, 2015 WL 393407, at *4 (Tex. App.—Houston [14th Dist.] January 29,

2015, no pet.) (“The proper scope of a permissive appeal is the determination of

controlling legal issues, about which there are legitimate disagreements, necessary

to the resolution of the case.”). Plaintiffs agree that there is a substantial ground

for difference of opinion, which is further demonstrated by the fact that no court
                                         -7-
has addressed this specific policy language. See Certain Underwriters at Lloyd’s

of London Subscribing to Policy Number: £FINFR0901509 v. Cardtronics, Inc.,

438 S.W.3d 770, 774 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (noting

permissive appeal was granted where Texas appellate courts had not addressed the

specific policy language).

      When the controlling legal issue addresses whether one party can properly

prevail, that issue is material to the ultimate resolution or termination of the

litigation. If Stewart’s argument is correct, there is no coverage liability based on

the February Notice. But if this Court does not accept the appeal and Stewart’s

arguments are eventually vindicated on a post-trial appeal, needless time, energy,

and resources will have been expended by all parties and the courts. All parties

and the trial court agree that allowing an immediate appeal would materially

advance the termination of this litigation. This Court should accept the appeal in

the interest of judicial economy.

II.   COVERAGE IS PREDICATED ON THE POLICY, STATE
      STATUTES AND COMMON LAW

      A.     The Policy requires the February Notice to be filed in records
             established by state statutes.
      The Texas Department of Insurance promulgates the language, terms, and

definitions found in title policies issued in Texas. See TEX. INS. CODE § 2703.001.

Specifically, the Texas Department of Insurance penned the definition of “Public

                                         -8-
Records” that appears in the Policy. See Loan Policy of Title Insurance (Form T-

2) (2014), available at http://www.tdi.texas.gov/title/documents/form_t-02.pdf

(Apx. H). Plaintiffs argue that coverage for their alleged loss falls under covered

risks 5 and 6 of the Policy, which cover losses based on certain enforcement

actions as long as a “notice” of intent to enforce an ordinance or another police

power describes the land and the notice is “recorded in the Public Records.” Apx.

G, pp. 1-2.

      The Policy defines “Public Records” in relevant part as “records

established under state statutes at Date of Policy for the purpose of imparting

constructive notice of matters relating to real property to purchasers for value and

without Knowledge.” Apx. G, p. 3 (Definition 1(k)) (emphasis added).

      For coverage to exist, the Policy requires that a notice describing the

property be filed in the Public Records according to state statutes.

      B.      The state statutes and City ordinance require the February Notice
              identify the proper owner.
      The Policy’s coverage, exclusions and definitions involving Public Records

must be interpreted in light of applicable Texas law. Constructive notice to a third

party is achieved when an instrument is properly recorded. See TEX. PROP. CODE §

13.002. The Texas Local Government Code permits a municipality to “file notice

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

which the property is located.” TEX. LOC. GOV’T CODE § 214.001(e). “The notice
                                         -9-
must contain the name and address of the owner of the affected property if

that information can be determined.” Id. (emphasis added). It is undisputed

that the City knew the name of the correct owner when it prepared and filed the

February Notice, but nevertheless identified the wrong owner.

      Further, the Local Government Code requires that the county clerk maintain

a “well-bound alphabetical index” for all instruments related to real property. TEX.

LOC. GOV’T CODE § 193.003(a). The index must be a cross-index that contains the

names of the grantors, grantees, and/or parties to the instrument affecting real

property. Id. § 193.003(b). Further, San Antonio Municipal Code section 6-162

proscribes the manner, form, and contents of the notices at issue here. “The pre-

hearing notice to the owner shall be “[p]ersonally to the owner in writing; or by

letter addressed to the owner at the owner’s post office address.” San Antonio,

Tex. Code of Ordinances ch. 6, art. VIII, § 6-162(b)(1-2) (2014) (emphasis added).

Although the February Notice was filed in the Official Public Records of Real

Property for Bexar County, it did not identify the proper owner, grantor, or grantee

and therefore did not provide constructive notice to a purchaser of the property or

conform with either the municipal mandate or the Texas Government Code.

      C.    Texas common law does not impart constructive notice under
            these circumstances.
      In order to determine whether there is constructive notice “to purchasers for

value” as described in the Policy, the Court should look to the common law. Texas
                                        -10-
courts have consistently held that a “party is not charged with constructive notice

of a recorded instrument which is not in his chain of title.” Sw. Title Ins. Co. v.

Woods, 449 S.W.2d 773, 774 (Tex. 1970) (emphasis added); see also Sanchez v.

Telles, 960 S.W.2d 762, 767 (Tex. App.—El Paso 1997, pet. denied); see also

Noble Mortg. & Invs. LLC v. D&M Vision Invs., LLC, 340 S.W.3d 65, 81 (Tex.

App.—Houston [1st Dist.] 2011, no pet.) (in Texas it is a “well-established rule

that a deed or instrument lying outside of his chain of title imports no notice”).

Chain of title refers to the ownership history of a piece of land, from its first owner

to the present one. BLACK’S LAW DICTIONARY 278 (10th ed. 2014).

      The rationale of this constructive notice rule is that “the only facilities

provided by statute for finding recorded instruments pertinent to any particular title

are the indices of grantors and grantees and a prospective purchaser or lienholder

will have no reason to search for instruments executed by persons outside of the

chain of title under which he claims.” Lone Star Gas Co. v. Sheaner, 305 S.W.2d
150, 155-56 (Tex. 1957). “To charge one acquiring an interest in realty with notice

of instruments executed by persons outside the chain of title would impose upon

him the duty of making a general search of every instrument filed.” Id. at 156.

Therefore, Plaintiffs would not be charged with notice of the demolition provided

by the defective February Notice, nor would a purchaser of the property.

                                         -11-
      It follows that a reasonable search by a purchaser would be under the name

of each grantor from the date such grantor acquired the property going forward.

See Wilson v. Dvorak, 228 S.W.3d 228, 234 (Tex. App.—San Antonio 2007, pet.

denied) (holding that judgment creditor being able to enforce lien against innocent

purchasers who had no notice of judgment lien due to creditor’s abstracting and

indexing of judgment under debtor’s maiden name would lead to absurd result). A

proper title search includes examination of the grantor-grantee indices. Jones v.

P.A.W.N. Enters., 988 S.W.2d 812, 823 (Tex. App.—Amarillo 1999, pet. denied)

(citing First S. Props., Inc. v. Vallone, 533 S.W.2d 339, 340 (Tex. 1976)).

      In compliance with the statutes and ordinance and common law discussed

above, a municipality’s notice of demolition must be properly filed in the Official

Public Records of Real Property and also correctly identify the grantor, grantee,

and/or owner of the real property in order to constitute constructive notice to a

purchaser of the property.

      D.     The City issued two notices that did not constitute constructive
             notice to a purchaser as required under the Policy, state statutes,
             City ordinance, or common law.

             1.    The January Notice was defectively filed by the City.
      As discussed previously, the City first issued a demolition notice in January

2008. This January Notice identified the correct property owner but was not

recorded in the Official Public Records for Real Property as required by the Texas

                                        -12-
Local Government Code. See TEX. LOC. GOV’T CODE § 214.001(e). This Court

issued an opinion that properly recognized the requirement of filing the notice in

the Official Public Records of Real Property and held that the January Notice was

not binding on D’Hanis Bank (predecessor bank to Plaintiffs) as a subsequent

lienholder. See D’Hanis, 2010 WL 3249956, at *3 (Apx. C). Now, this Court is

faced with deciding whether the City’s second attempt at notice, the February

Notice, complied with Texas law, the Policy and whether a notice which does not

name the correct owner and is not sent to the correct address constitutes

constructive notice to a purchaser as required by the Policy.

             2.    The February Notice was also defective pursuant to the
                   Policy, applicable state statutes, City ordinance, and Texas
                   case law.
      Because the February Notice did not identify the proper owner or property

address, it was not properly filed in the “Public Records” as the Policy and state

law require. Therefore, as to the land at issue it did not “impart[] constructive

notice of matters relating to real property to purchasers for value” (Apx. G, p. 2).

Only an instrument that is properly recorded is notice to all persons of the

existence of that instrument. See TEX. PROP. CODE § 13.002. The parties agree

that a search of the grantor-grantee index for matters affecting the land that secured

the Plaintiffs’ loan would not have disclosed the February Notice.

                                         -13-
      E.      Plaintiffs erroneously argue that the state statutes do not apply to
              the Policy.
      Plaintiffs contend that Texas Local Government Code § 214.001(e) does not

apply and that this is a pure contract dispute based on the language of the Policy.

See Plaintiff’s Response to Defendant’s Second Motion for Summary Judgment, p.

7 (Apx. I).        Plaintiffs incorrectly argue that the Policy language expands

constructive notice beyond notice to a purchaser and contends Stewart had notice

of a filed record even when the purchaser would not be charged with notice.

However, that is not what the Policy and the law mandate. With a contorted

reading of the Policy, Plaintiffs have contended that the February Notice satisfies

the notice requirements of covered risks 5 and 6 and imparted constructive notice

to Stewart. Those covered risks provide that, subject to the Policy’s exclusions,

exceptions, and conditions, Stewart insures the named insured against loss or

damage sustained or incurred by reason of:

              5.     The violation or enforcement of any law,
                     ordinance, permit, or governmental regulation
                     (including those related to building and zoning)
                     restricting, regulating, prohibiting or relating to:

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

                     (b)   the character, dimensions or location of any
                           improvement erected on the Land;

                     (c)   subdivision of land; or

                                         -14-
                   (d)      environmental protection

             if a notice, describing any part of the Land, is recorded in
             the Public Records setting forth the violation or intention
             to enforce, but only to the extent of the violation or
             enforcement referred to in that notice.

             6.    An enforcement action based on the exercise of a
                   governmental police power not covered by
                   Covered Risk 5 if a notice of the enforcement
                   action, describing any part of the Land, is recorded
                   in the Public Records, but only to the extent of the
                   enforcement action referred to in that notice.

See Apx. G, pp. 1-2 (emphasis added).

      Covered risks 5 and 6 condition coverage on there being a “notice” of intent

to enforce an ordinance or another police power that describes the land and that the

notice be “recorded in the Public Records.” The term “Public Records” is defined

in the Policy as follows:

             “Public Records”: records established under state
             statutes at Date of Policy for the purpose of imparting
             constructive notice of matters relating to real
             property to purchasers for value and without
             Knowledge. With respect to Covered Risk 5(d), “Public
             Records” shall also include environmental protection
             liens filed in the records of the clerk of the United States
             District Court for the district where the Land is located.

See Apx. G, p. 3 (Definition 1(k))(emphasis added).

      Basically, Plaintiffs argue that Stewart should have constructive notice

because the February Notice identified the property by lot and block number, even

                                         -15-
though the notice identified the wrong owners and wrong address and therefore

would not be constructive notice to a purchaser. However, a plain reading of

covered risks 5 and 6 makes it clear that the phrase, “[i]f a notice, describing any

part of the land, is recorded in Public Records” relates not to whether the notice is

complete and proper in order to comply with the Public Records definition, but

simply that the notice must contain a description of the land. Courts should

examine and consider the entire writing in an effort to harmonize and give effect to

all the provisions of the contract so that none will be rendered meaningless. State

Farm Lloyds v. Gulley, 399 S.W.3d 242, 247 (Tex. App.—San Antonio 2012, no

pet.) (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)).           No single

provision taken alone will be given controlling effect; rather, all the provisions

must be considered with reference to the whole instrument. Id. Courts presume

that the parties to a contract intend every clause to have some effect. Id. (citing

Ogden v. Dickinson State Bank, 662 S.W.2d 330, 332 (Tex. 1983). Covered risks

5 and 6 are to be read in conjunction with the definition of Public Records, which

requires the record be established under state statute. Only then is the record

constructive notice to a purchaser.

      The Texas Local Government Code requires the City to identify the property

owner, if known. See TEX. LOC. GOV’T CODE § 214.001(e). There is no question

that the City knew the owner’s correct name and address when the February Notice

                                        -16-
was prepared by the City. Therefore, the City was statutorily obligated to send the

February Notice to the proper owners. Id. Failure to send the February Notice to

the proper owner means the notice was not filed in the real property records so as

to be in the chain of title. Therefore, a search by grantor, grantee or owner would

not identify the February Notice so as to be constructive notice to a purchaser.

Stewart expects Plaintiffs will argue that if the owners name is not known, the City

may take other steps. That is irrelevant to whether the City filed a defective notice,

which it did in this case, and whether the February Notice was in the chain of title

so as to constitute constructive notice to a purchaser.

      Plaintiffs have broadly claimed, without authority, that Stewart owes or

owed them a duty to investigate “matters of real property” filed in Public Records.

Stewart is not a title abstractor and owes no duty to examine title. Tamburine v.

Ctr Sav. Ass’n, 583 S.W.2d 942, 947 (Tex. Civ. App.—Tyler 1979, writ ref’d

n.r.e.). Plaintiffs cannot refute this case law. The only duty imposed on Stewart is

the duty to indemnify its insured against losses caused by defects in title subject to

the terms, conditions, exceptions and exclusions under the Policy. Chicago Title

Ins. Co. v. McDaniel, 875 S.W.2d 310, 311 (Tex. 1994).             A title insurance

company owes no duty to point out any outstanding encumbrances. Martinka v.

Commw. Land Title Ins. Co., 836 S.W.2d 773, 777 (Tex. App.—Houston [1st

                                         -17-
Dist.] 1992, writ denied); see also Stewart Title Guar. Co. v. Cheatham, 764
S.W.2d 315, 320-21 (Tex. App.—Texarkana 1988, writ denied).

                                        PRAYER
       THEREFORE, Appellant Stewart Title Guaranty Company respectfully

prays that this Court grant its Petition for Permission to Appeal the Amended

Order in all respects, and grant such other and further relief, both general and

special, at law or in equity, to which it is justly entitled.

                                           -18-
Dated: April 14, 2015     Respectfully submitted,

                          /s/ I Clay Rogers
                          I. Clay Rogers
                          State Bar No. 17172150
                          crogers@morganlewis.com
                          Ankita Puri
                          State Bar No. 24074920
                          ankita.puri@morganlewis.com
                          MORGAN, LEWIS & BOCKIUS LLP
                          1000 Louisiana Street, Suite 4000
                          Houston, Texas 77002
                          Telephone: (713) 890-5000
                          Fax: (713) 890-5001
                          Appellate Counsel for Defendant-
                          Appellant Stewart Title Guaranty
                          Company

                          Scott R. Breitenwischer
                          State Bar No. 02947695
                          scott.breitenwischer@roystonlaw.com
                          Andrew Nash
                          State Bar No. 24083550
                          andrew.nash@roystonlaw.com
                          ROYSTON, RAYZOR,
                          VICKERY & WILLIAMS, LLP
                          711 Louisiana Street, Suite 500
                          Houston, Texas 77002
                          Telephone: (713) 224-8380
                          Fax: (713) 225-9945
                          Trial Counsel for Defendant-Appellant
                          Stewart Title Guaranty Company

                        -19-
                      CERTIFICATE OF COMPLIANCE

      I, I. Clay Rogers, certify that this Petition for Permission to Appeal

Amended Order Granting Plaintiffs’ Second Motion for Partial Summary

Judgment and Denying Defendant’s Motion for Summary Judgment and Granting

Defendant’s Motion for Permission to Appeal and to Stay Proceedings Pending

Appeal was prepared using Microsoft Word 2007, which indicated that the total

word count (exclusive of those items listed in Texas Rule of Appellate Procedure

9.4(i)(1)) is 4,299 words.

                                                 /s/ I. Clay Rogers
                                                  I. Clay Rogers

                                      -20-
                         CERTIFICATE OF SERVICE

      I, I. Clay Rogers, certify that on April 14, 2015, I filed and served an

electronic copy of this document and all exhibits thereto via the Court’s ECF

system. I further certify that on this same day, I served one electronic copy of the

Petition upon each of the following counsel of record for Plaintiffs-Appellees:

                         David B. West
                         David Vanderhider
                         COX SMITH MATTHEWS, INC.
                         112 E. Pecan Street, Suite 1800
                         San Antonio, Texas 78205

                         Attorneys for Plaintiffs-Appellees

                                               /s/ I Clay Rogers
                                               I. Clay Rogers

                                        -21-
                           No. __________________
               _________________________________________

                   IN THE COURT OF APPEALS
   FOR THE FOURTH DISTRICT OF TEXAS AT SAN ANTONIO, TEXAS
            _________________________________________

      STEWART TITLE GUARANTY COMPANY, Defendant-Appellant
                                       v.
VANTAGE BANK TEXAS, SUCCESSOR BY MERGER TO D’HANIS STATE
         BANK, and BANPROP, L.L.C., Plaintiffs-Appellees
               _______________________________________
    On Appeal from the 150th Judicial District Court of Bexar County, Texas
                          Cause No. 2013-CI-14899
                         (Honorable Laura Salinas)
              _________________________________________

    APPENDIX TO APPELLANT’S UNOPPOSED PETITION FOR
     PERMISSION TO APPEAL AMENDED ORDER GRANTING
    PLAINTIFFS’ SECOND MOTION FOR PARTIAL SUMMARY
JUDGMENT AND DENYING DEFENDANT’S MOTION FOR SUMMARY
    JUDGMENT AND GRANTING DEFENDANT’S MOTION FOR
 PERMISSION TO APPEAL AND TO STAY PROCEEDINGS PENDING
                          APPEAL
          _________________________________________

      In compliance with rule 28.3 of the Texas Rules of Appellate Procedure,

Defendant-Appellant Stewart Title Guaranty Company submits this Appendix to

its Petition for Permission to Appeal Amended Order Granting Plaintiffs’ Second

Motion for Partial Summary Judgment and Denying Defendant’s Motion for

Summary Judgment and Granting Defendant’s Motion for Permission to Appeal

and to Stay Proceedings Pending Appeal containing the following items:

                                      -22-
Apx. A   March 31, 2015 Amended Order Granting Plaintiffs’ Second
         Motion for Partial Summary Judgment and Denying Defendant’s
         Motion for Summary Judgment and Granting Defendant’s Motion
         for Permission to Appeal and to Stay Proceedings Pending Appeal
Apx. B   January 2008 Notice of Hearing
Apx. C   City of San Antonio v. D’Hanis State Bank, No. 04-10-00181-CV,
         2010 WL 3249956 at *3 (Tex. App.—San Antonio, Aug. 18,
         2010, no pet.) (mem. op.)
Apx. D   February 2008 Notice of Hearing
Apx. E   October 20, 2014 Letter from Judge Richard Price denying
         Stewart Title Guaranty Company’s Traditional and No Evidence
         Motion for Summary Judgment and Vantage Bank Texas,
         Successor by Merger to D’Hanis State Bank’s Motion for Partial
         Summary Judgment
Apx. F   Judge Salinas’s January 30, 2015 Order Granting Plaintiffs’
         Second Motion for Partial Summary Judgment and Denying
         Defendant’s Second Motion for Summary Judgment
Apx. G   Loan Policy of Title Insurance Issued by Stewart Title Guaranty
         Company issued to D’Hanis State Bank, and Each Successor in
         Ownership
Apx. H   Texas Department of Insurance T-2 Form
Apx. I   Plaintiffs’ Response to Defendant’s Second Motion for Summary
         Judgment
Apx. J   Plaintiffs’ Third Amended Original Petition
Apx. K   October 2011 Notice of Hearing

                              -23-
Appendix A
                                      CAUSE NO. 2013-CI-14899

    VANTAGE BANK TEXAS, Successor by                 5       IN THE DISTRICT COURT OF
    Merger to D'Hanis State Bank and
    BANPROP, L.L.C.,

              Plaintiffs,
                                                               BEXAR COUNTY, TEXAS
   v.

   STEWART TITLE GUARANTY
   COMPANY,

             Defendant,                                       150th JUDICIAL DISTRICT

        ORDER GRANTING DEFENDANT STEWART TITLE GUARANTY COMPANY'S
        MOTION TO PERMIT INTERLOCUTORY APPEAL AND REQUEST FOR STAY
                              PENDING APPEAL

             On January 6, 2015, came on for consideration Plaintiffs' Second Motion for Partial

  Summary Judgment ("Plaintiffs' Summary Judgment Motion") and Defendant Stewart Title

  Guaranty Company's Second Traditional and No Evidence Motion for Summary Judgment

  ("Defendant's Summary Judgment Motion"). After considering the motions, responses, summary

  judgment evidence, and all other matters properly before the Court, the Court is of the opinion

  that Plaintiffs' Summary Judgment Motion should be GRANTED and Defendant's Summary

 Judgment Motion should be DENIED.

                     MAR 3 1 2015
           On                            2015, came on for consideration Defendant Stewart Title

 Guaranty Company's Motion to Permit Interlocutory Appeal and Request for Stay Pending

 Appeal ("Appeal and Stay Motion"), Plaintiff Vantage Bank Texas, Successor By Merger To

D'Hanis State Bank, and Banprop, L. L. C., filed a response stating that it does not oppose

Defendant's request for permission to appeal and to stay all pending action in the district court

pending that appeal.

DB 1f 82768049.1
         After considering the motion, response, and all other matters properly before the Court,

   the Court is of the opinion that the issue of whether the City's "February Notice" was "recorded

   in the Public Records" as the term "Public Records" is defined in the policy is a controlling

   question of law as to which there is a substantial ground for difference of opinion, and that an

  immediate appeal would materially advance the ultimate termination of the litigation. The Court

  is therefore of the opinion that the Appeal and Stay Motion should be GRANTED.

            It is, THEREFORE, ORDERED that Plaintiffs' Second Motion for Partial Summary

  Judgment is GRANTED in its entirety.

           It is further ORDERED that the issue of coverage is detennined in Plaintiffs' favor as a

  matter of law such that the Loan Policy of Title Insurance issued by Defendant Stewart Title

  Guaranty Company, policy serial number M-5952-000007292, affords coverage for Plaintiffs'

 losses sustained or incurred by reason of (1) the violation or enforcement of a law, ordinance, or

 governmental regulation restricting, regulating, prohibiting, or relating to the covered property,

 or (2) an enforcement action based on the exercise of a governmental police power.

          It is further ORDERED that Defendant Stewart Title Guaranty Company's Second

 Traditional and No Evidence Motion for Summary Judgment is DENIED in its entirety.

          It is further ORDERED that Defendant Stewart Title Guaranty Company's Motion to

Permit Interlocutory Appeal and Request for Stay Pending Appeal is GRANTED.

          It is further ORDERED that Defendant Stewart Title Guaranty Company is permitted to

appeal the issue of whether the City's "February Notice" was "recorded in the Public Records" as

the term "Public Records" is defined in the policy and as contained in this Amended Order to the

                                                 2
DB1/ 82768049.1
     Court of Appeals for the Fourth Court of Appeals District, pursuant to section 51.014(d) of the

     Texas Civil Practice and Remedies Code and rule 28.3 of the Texas Rules of Appellate

     Procedure.

                 It is further ORDERED that all proceedings in the district court in this cause are stayed

     pending resolution of the interlocutory appeal.

                                                            Iva* 3 1 2015
                 SIGNED THIS                   day of                       , 2015.    Laura Salinas
                                                                                       Presiding Judge
                                                                                       186th 'District Court
                                                                                       Bexar County, Texas

                                                        THE HONORABLE LAURA SALINAS,
                                                        JUDGE PRESIDING

DB 1 / 82768 049. 1                                     3
    APPROVED AS TO FORM:

    By:
       David B. West
       State Bar No. 21196400
      dbwest@coxsmith.com
      David A. Vanderhider
      State Bar No. 24070787
      dvanderhider@coxsmith.com
      COX MITI MATTHEWS INCORPORATED
      112 E. Pecan Street, Suite 1800
      San Antonio, Texas 78205
      (210) 554-5500 Telephone
      (210) 226-8395 Facsimile
   Attorneys for Vantage Bank Texas,
   Successor by Merger to D 'Hants State Bank,
   and Banprop, L.L.C.

                                1
   By:
      I.    y Rogers         V
      State Bar No. 71721
      crogers morganlewis. om
     Ankita Puri
     State Bar No. 24074920
     anIcita.puriaAmorganlewis.com
     MORGAN LEWIS & BOCKIUS, LLP
     1000 Louisiana Street, Suite 4000
     Houston, Texas 77002
     (713) 890-5000 —Telephone
     (713) 890-5001 —Facsimile

      Scott Breitenwischer
      State Bar No. 02947695
      Scott.breitenwischerAroystonlaw.cotn
      Andrew Nash
      State Bar No. 24083550
      Andrewmaslaroystonlaw.corn
     ROYSTON, RAYZOR, VICKERY &WILLIAMS, L.L.P.
     Pennzoil Place
     711 Louisiana Street, Suite 500
     Houston, Texas 77002-8380
     (713) 224-8380 -- Telephone
     (713) 225-9945 — Facsimile
 Attorneys for Stewart Title Guaranty Company

                                                 4
DB1/ 82768049.1
Appendix B
                                                         CITY OF SAN ANTONIO

                                      NOTICE OF HEARING
  OWNER'S NAME; Cantu Raul S. Family Ltd. Prtnrshp #2                     PROPERTY AT: 119 Jackson-Keller
                  8546 Broadway St. Ste 234
                  San Antonio, TX 78217-6348
  LEGAL DESCRIPTION:        NCB 10060             BLK 13                LOT 7

  A Public Hearing will be held before the City of San Antonio Dangerous Structure
  Determination Board on January 14., 2008 at 8:30 A.M in the City Council Chambers of the
  Municipal Plaza Building located at 114 W. Commerce Street. All owners, mortgagees, or
  lienholders of record have been notified of this hearing.
  The purpose of this hearing is to determine whether the above property constitutes a public
  nuisance in need of abatement. Any persons having an interest in the property or who may be
  affected by the conditions of the property shall be afforded the opportunity to be heard and to
  present evidence for the Board's consideration.

  If the property is determined to be a public nuisance, the Board may order remediation action
  up to and including demolition of the structure at the owner's expense.

  CONTACT FOR FURTHER INFORMATION:                           DAVID D. GARZA
                                                             Director of Housing & Neighborhood Services
1,911,1110111111111111111111                                 P. 0. Box 839966
                                                             San Antonio, Texas 78283-3966

  The Municipal Plaza Building is wheelchair accessible. Accessible parking spaces are available upon
   request. Interpreters for the deaf must be requested at least 24 hours prior to the hearing by calling
                                               207-7245-TDD

                                                              1_1111111f 1111111111111111
                                                             II
                                                                  2-
 STATE OF TEXAS
 COUNTY OF BEXAR
 This instrument was acknowledged before me on the -2-    day of
 200S, by DAVID D. GARZA, Director of Housing & Neighborhood Services, on behal f the
 CITY OF SAN ANTONIO, Bexar County, Texas, a Municipal Corporation.

                                      4 ,4.;ti , REVES HERNANDEZ
                                      i e —1. NOTARY PUBLIC
                                             7 STATE OF TEXAS rotary Pu                     State of Texas
                                         2 / My Comm. Exp.11-18-20(M
 AFTER RECORDING RETURN TO:
 HOUSING & NEIGHBORHOOD SERVICES DEPARTMENT
 AT7N: DAVID D. GARZA                                  Doc# 8887 Fees: $0,00
 P. O. Box 839966                                      01/04/2008 3:05PM # Pages 1
                                                       Filed 4 Recorded in the Offic141 Public
 San Antonio, Texas 78283-3966                         Records of BEXAR COUNTY
                                                       GERARD RICKHOFF COUNTY CLEF        iJCI        ILA l'

                                                                                            S

                                                                                DHSB-Banprop - 000/41
Appendix C
City of San Antonio v. D'Hanis State Bank, Not Reported in S.W.3d (2010)

                                                   2010 WL 3249956
                                     Only the Westlaw citation is currently available.

                   SEE TX R RAP RULE 47.2 FOR DESIGNATION AND SIGNING OF OPINIONS.

                                              MEMORANDUM OPINION
                                               Court of Appeals of Texas,
                                                     San Antonio.

                                        CITY OF SAN ANTONIO, Texas, Appellant
                                                               v.
                                             D'HANIS STATE BANK, Appellee.

                                          No. 04-10-00181-CV. I Aug. 18, 2010.

From the 73rd Judicial District Court, Bexar County, Texas, Trial Court No. 2010-CI-01778; Michael Peden, Judge Presiding.

Attorneys and Law Firms

Savita Rai, Clarissa L. Chavarria, Assistant City Attorneys, Samuel C. Adams, Office of the City Attorney, San Antonio, TX,
for Appellant.

R. Harry Akin, Akin & Akin LLP, Georgetown, TX, for Appellee.

Sitting: CATHERINE STONE, Chief Justice, PHYLIS J. SPEEDLIN, Justice, STEVEN C. HILBIG, Justice.

Opinion

                                                MEMORANDUM OPINION

Opinion by CATHERINE STONE, Chief Justice.

 *1 The City of San Antonio, Texas ("City") appeals the trial court's orders denying the City's plea to the jurisdiction and
granting a temporary injunction in favor of D'Hanis State Bank ("Bank"). The City contends the trial court erred in denying its
plea to the jurisdiction because the Bank lacked standing to challenge an order of the City's Dangerous Structure Determination
Board ("Board"). We affirm the trial court's orders.

                                                          Background

On January 14, 2008, the Board issued a demolition order finding an apartment complex (the "Property") owned by The Raul S.
Cantu Family Limited Partnership No. 2 ("Cantu") constituted a public nuisance and ordering its demolition. Although notice
of the hearing regarding the demolition order was filed in the public notice records of Bexar County, the notice was not filed in
the real property records. Cantu sought judicial review of the demolition order by filing a petition in district court in February
of 2008.

In September of 2009, Cantu sold the Property to S.A. Eden Roc Apartments, LLC ("S.A. Eden Roc"). The Bank financed
the purchase price for the Property and a construction loan for its renovation. The Warranty Deed with Vendor's Lien, which
documented both the conveyance of the Property to S.A. Eden Roc and the Bank's vendor's lien, and the Deed of Trust, which
further documented the Bank's lien, were filed in the real property records on September 8, 2009.

                  2013 Thomson Reuters, No claim to original U.S. Governm               .o
                                                                                        a
City of San Antonio v. D'Hanis State Bank, Not Reported in S.W.3d (2010)

On September 18, 2009, the City granted S.A. Eden Roc a series of building permits relating to the renovation of the Property,
and renovation work was commenced with financing provided by the Bank. On September 24, 2009, the City revoked the
permits. At that time, the Bank had loaned approximately $516,000.00 to S.A. Eden Roc. Approximately $380,000.00 of the
loan proceeds was used to pay the purchase price for the Property, and the balance of the loan proceeds was spent on renovations.

On October 15, 2009, the City moved to dismiss Cantu's lawsuit seeking judicial review of the demolition order, asserting,
among other grounds, that Cantu had sold the Property. In addition to being filed over one and one-half years after Cantu filed
the lawsuit, the City's motion was filed after the City was on notice that the Property had been sold, after the City granted S.A.
Eden Roc permits to renovate the Property, and after the Bank had advanced substantial funds to renovate the Property. On
October 21, 2009, the trial court signed an order granting the City's motion and dismissing Cantu's lawsuit.

On November 12, 2009 the Bank received notice that the City revoked the permits previously granted to S.A. Eden Roc and
ordered work on the Property to stop. The Bank did not have notice of the demolition order until mid-December of 2009.

On February 4, 2010, the Bank filed suit against the City requesting a temporary restraining order and injunctive relief to prevent
the demolition of the apartment complex. The City filed a plea to the jurisdiction, asserting the Bank lacked standing to pursue
the relief it sought. The trial court denied the City's plea to the jurisdiction and granted a temporary injunction in favor of the
Bank. The City appeals.

                                               PLEA TO THE JURISDICTION

 *2 We review a trial court's order granting or denying a plea to the jurisdiction de novo. Houston Mien. Employees Pension Sys.
v. Ferrell, 248 S.W.3d 151, 156 (Tex.2007). We consider the facts alleged by the plaintiff, and we consider evidence submitted
by the parties to the extent the evidence is relevant to the jurisdictional issue. Id.

The City contends the trial court erred in denying its plea to the jurisdiction because the Bank lacked standing to challenge
the demolition order. The City asserts the Bank lacked standing because: (1) section 214.0012 of the Texas Local Government
Code permits judicial review of a demolition order to be sought only by an owner or lienholder aggrieved by the order at the
time the order is issued; (2) section 214.0012 provides the exclusive method for seeking judicial review of the demolition order;
and (3) the Bank cannot collaterally attack the demolition order by seeking injunctive relief. I Each of these contentions is
based on the premise that the Bank is seeking judicial review of the order by challenging the validity of the order as against
all parties. Although the Bank's pleadings could be broadly read as asserting such a challenge, the Bank clarified its position at
the hearing before the trial court. The Bank argued at the hearing that the trial court was not deprived of jurisdiction because
the demolition order was unenforceable as against the Bank, which was an innocent lender for value similar to a bona fide
purchaser. The Bank explained:

   But the most important problem with this case is this-it's not whether the Cantus were given their rights and had their rights
  of the appeals and took care of that or whether Falcon Bank [Cantu's lender and the prior lienholder] had their rights and
   pursued those rights. It's what about D'Hanis State Bank, who had no actual and no constructive notice of this proceeding,
  of the order or of anything else. Because this building was allowed to stay up, because there was no publication of notice
   that could have been put in the real property records and would have given constructive notice to subsequent lien holders
   like this bank-because that wasn't done, they took the property as an innocent-well, they were an innocent lien extender or
   an innocent lender for value.
The purpose of the Uniform Declaratory Judgments Act is "to settle and to afford relief from uncertainty and insecurity with
respect to rights, status, and other legal relations." TEX. CIV. PRAC. & REM.CODE ANN. § 37.002(b) (Vernon 2008). Under
the Act, a person interested under a deed or written contract is entitled to a determination regarding any question of construction

                  2013 1homson Reuters. No claim to original U.S. Government Works
City of San Antonio v. D'Hanis State Bank, Not Reported in S.W.3d (2010)

or validity arising under the deed or contract and to obtain a declaration ofthe person's rights, status, or legal relations thereunder.
Id. at § 37.004(a). In this case, the Bank is seeking a declaration of its rights under the Warranty Deed and Deed of Trust. In
particular, the Bank is seeking a declaration that its rights under the Warranty Deed and Deed of Trust preclude the City from
proceeding with the demolition of the apartment complex. Because the Bank is a person interested under a deed or written
contract, the Act gives the Bank standing to seek declaratory relief, and the trial court did not err in denying the City's plea
to the jurisdiction.

                                                  TEMPORARY INJUNCTION

 *3 The decision to grant a temporary injunction lies in the sound discretion of the trial court and is subject to reversal only for
a clear abuse of that discretion. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex.2002); Khaledi v. H.K. Global Trading,
Ltd., 126 S.W.3d 273, 280 (Tex.App.-San Antonio 2003, no pet.). The court of appeals cannot reverse the trial court's decision
unless the trial court acted unreasonably or in an arbitrary manner, without reference to guiding rules or principles. Butnaru,
84 S.W.3d at 211. An abuse of discretion does not exist when the trial court bases its decision on conflicting evidence and the
evidence reasonably supports its conclusion. Butnaru, 84 S.W.3d at 211; Khaledi, 126 S.W.3d at 280.

The purpose of a temporary injunction is to preserve the status quo until a final hearing on the merits. Butnaru, 84 S.W.3d at
204; Khaledi, 126 S.W.3d at 279. To obtain a temporary injunction, the applicant must plead and prove three specific elements:
(1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent, and irreparable
injury in the interim. Butnaru, 84 S.W.3d at 204; Khaledi, 126 S.W.3d at 280.

In its brief, the City does not directly address which element it contends the Bank failed to establish. The City does, however,
assert that the City's failure to file the notice of the hearing regarding the demolition order in the real property records does not
render the demolition order void. We construe this argument as a challenge to whether the Bank established a probable right to
relief in view of the notice filed by the City. In establishing a probable right to the relief it sought, the Bank was not required
to establish that it would prevail on final trial. Khaledi, 126 S.W.3d at 280.

Status as a bona fide lender/mortgagee is obtained if the lender/mortgagee obtained an interest in the property in good faith,
for value and without notice of the claim or interest of a third party. Houston First Am. Say. v. Musick, 650 S.W.2d 764, 769
(Tex.1983); World Say. Bank, F.S.B. v. Gantt, 246 S.W.3d 299, 306 (Tex.App.-Houston [14th Dist.] 2008, no pet.). The City
appears to argue that the Bank is not protected as a bona fide lender because the City filed a notice of the hearing regarding the
demolition order with the Bexar County Clerk. See 'Musick, 650 S.W.2d at 769 (requiring bona fide lender to be without notice
of a claim or interest of a third party); Gantt, 246 S.W.3d at 306 (same). However, section 214.001(e) of the Local Government
Code provides that a notice of hearing regarding a demolition order is binding on subsequent grantees and lienholders only
if the municipality files the notice of hearing in the Official Public Records of Real Property. See TEX. LOC. GOV'T CODE
ANN.. § 214.001(e) (Vernon Supp.2009) (providing filing of the notice of the hearing regarding a demolition order is binding on
subsequent lienholders after the filing of the notice in the Official Public Records of Real Property). The evidence is undisputed
that the City's notice of hearing was filed in the public notice records which are maintained separately from the real property
records. 2 Accordingly, under section 214.001(e), the notice was not binding on the Bank as a subsequent lienholder, and the
City has failed to meet its burden of showing that the trial court abused its discretion in granting the temporary injunction.

                                                          CONCLUSION

*4 The trial court's orders are affirmed.

       • . 1.(;.;,r Ti 2013 Thomson Reuters. N          im to    inirij ll.S. Cavern!.      t VVW,•ks.
City of San Antonio v. D'Hanis State Bank, Not Reported in S.W.3d (2010)

Footnotes
1      We note that the cases cited by the City to support its contention that a demolition order is not subject to collateral attack involve
      subsequent proceedings brought by the individuals or entities that owned the property at the time the demolition order was issued.
2      Although the City cites cases that hold that an instrument is considered recorded when deposited for recording with the clerk even if
       the instrument is not recorded by the clerk, the clerk in this case had recorded the notice of hearing. No evidence was presented that
       the City requested that the notice be recorded in the real property records instead of the public notice records where the clerk testified
       that such notices are routinely recorded. Accordingly, the cases cited by the City are readily distinguishable.

End   or Document                                                           (.0 2013 Thomson Reuters. No claim to original U.S. Government Works.

                    201 3 Thomson Reuters. No claim to original U S. Governrnent Works.                                                        4
Appendix D
                                                       CITY OF SAN ANTONIO
                         SCANNED
                                                                       1.1111711111210.11111.11118131
                                             NOTICE OF HEARING
OWNER'S NAME: OLIVARES, PABLO GARZA                               PROPERTY AT: 14420 HIGGINS RD
              CIO LUIS A GALVAN
              1831 TEXAS AVE
              SAN ANTONIO TEXAS 78228

LEGAL DESCRIPTION:                 NCB 10060         BLK 13        LOT 7

A Public Hearing will be held before the City of San Antonio Dangerous Structure
Determination Board on February 11, 2008 at 8:30 A.M. in the City Council Chambers of
the Municipal Plaza Building located at 114 W. Commerce Street. All owners, mortgagees, or
lienholders of record have been notified of this hearing.
The purpose of this hearing is to determine whether the above property constitutes a public
nuisance in need of abatement. Any persons having an interest in the property or who may be
affected by the conditions of the property shall be afforded the opportunity to be heard and to
present evidence for the Board's consideration.

if the property is determined to be a public nuisance, the Board may order remediation action
up to and including demolition of the structure at the owner's expense.

CONTACT FOR FURTHER INFORMATION:                           DAVID D. GARZA
                                                           Director of Housing & Neighborhood Services
                                                           P. 0. Box 839966
                                                           San Antonio, Texas 78283-3966
The Municipal Plaza Building is wheelchair accessible. Accessible parking spaces are available upon
 request. Interpreters for the deaf must be requested at least 24 hours prior to the hearing by calling
                                             207-7245-TDD

STATE OF TEXAS
COUNTY OF BEXAR
This instrument was acknowledged before me on the 30 day of           vc.---4        )
200ff by DAVID D. GARZA, Director of Housing & Neighborhood Services, on behalf of the
CI             ANTONIO, Bexar County, Texas, a Municipal Corporation.
      .," Ilk, REYES HERNANDEZ ,
      if     t. NOTARY PUBLIC
              i MU OF TEXAS
        .4,,,,,,0 My Corrim ixr 11.11140w?
                                                                  Nota        blic, State of Texas
AFTER RECORDING RETURN TO:
HOUSING & NEIGHBORHOOD SERVICES DEPARTMENT
ATM DAVID D. GARZA
P. 0 Box 839966                                                                    111111111111111
San Antonio, Texas 78283-3966

                                                                               a

                                                                         DHSB-Banprop - 000064
Appendix E
                                    RICHARD PRICE
                                        JUDGE
                                     285111 DISTRICT (MUM.
                                  BEXAR. COUNTY COURTHOUSE
                                    SAN ANTONIO, TX 78205

                                         (210) 335.2086

                                            October 20, 2014

VIA EMAIL dbwest@coxsmith.com
Mr. David B. West
VIA EMAIL tivanderhider@coxsmith.com
Mr. David A. Vanderhider
Cox Smith Matthews Incorporated
112 East Pecan, Ste. 1800
San Antonio, Texas 78205

VIA EMAIL scott.breitenwischer@roystonlaw.com
Mr. Scott R. Breitenwischer
VIA EMAIL andrew.nash@roystonlaw.com
Mr. Andrew R. Nash
Royston, Rayzor, Vickery & Williams, LLP
711 Louisiana, Ste. 500
Houston, Texas 77002

RE: Cause No. 2013-CI-14899
Vantage Bank Texas, et al. vs. Stewart Title Guaranty Company
Filed in the 150th District Court

Dear Counsel:

       After considering Stewart Title Guaranty Company's Traditional and No Evidence Motion
for Summary Judgment and Vantage Bank Texas, Successor by Merger to D'Hanis State Bank's
Motion for Partial Summary Judgment, it is my ruling that all motions are denied. I request that
Mr. West prepare the order and circulate it to o using counsel for approval as to form.

                                             ery truly yours,

RP/dg                                       285 District Court
Appendix F
                                   Cause No. 2013-CI-14899

VANTAGE BANK TEXAS, SUCCESSOR                                       IN THE DISTRICT COURT
BY MERGER TO D'HANIS STATE BANK,
and BANPROP, L. L. C.,

       Plaintiffs,
                                                                    150111 JUDICIAL DISTRICT
v.

STEWART TITLE GUARANTY COMPANY,

       Defendant.                                                        BEXAR COUNTY, TX

                  ORDER GRANTING PLAINTIFFS' SECOND
          MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING
          DEFENDANT'S SECOND MOTION FOR SUMMARY JUDGMENT

       On January 6, 2015, came on for consideration Plaintiffs' Second Motion for Partial

Summary Judgment ( "Plaintiffs' Motion") and Defendant Stewart Title Guaranty Company's

Second Traditional and No Evidence Motion for Summary Judgment ("Defendant's Motion").

After considering the motions, responses, summary judgment evidence, and all other matters

properly before the Court, the Court is of the opinion that Plaintiffs' Motion should be

GRANTED and Defendant's Motion should be DENIED.

       It is, therefore, ORDERED that Plaintiffs' Second Motion for Partial Summary

Judgment is GRANTED in its entirety.

       It is further ORDERED that the issue of coverage is determined in Plaintiffs' favor as a

matter of law such that the Loan Policy of Title Insurance issued by Defendant Stewart Title

Guaranty Company, policy serial number M-5952-000007292, affords coverage for Plaintiffs'

losses sustained or incurred by reason of (1) the violation or enforcement of a law, ordinance, or
governmental regulation restricting, regulating, prohibiting, or relating to the covered property,

or (2) an enforcement action based on the exercise of a governmental police power.

       It is further ORDERED that Defendant Stewart Title Guaranty Company's Second

Traditional and No Evidence Motion for Summary Judgment is DENIED in its entirety.

SIGNED THIS *4) day of January, 2015.

                                                    ONOR LE LA           A SALINAS
                                                     PRESI ING

                                                2
APPROVED AS TO FORM ONLY:

By:
      David B. West
      State Bar No. 21196400
      dbwest@coxsmith.com
      David A. Vanderhider
      State Bar No. 24070787
      dvanderhider@coxsmith.com
      Bonnie K. Kirkland
      State Bar No. 24074539
      bkirkland(@coxsmith.com
      COX SMITH MATTHEWS INCORPORATED
      112 E. Pecan Street, Suite 1800
      San Antonio, Texas 78205
      (210) 554-5500 — Telephone
      (210) 226-8395 — Facsimile
ATTORNEYS FOR VANTAGE BANK TEXAS, SUCCESSOR BY MERGER TO
D'HANIS STATE BANK, AND BANPROP, L.L.C.

By:
      Scott Breitenwischer
      State Bar No. 02947695
      Scott.breitenwischeraroystonlaw.com
      Andrew Nash
      State Bar No. 24083550
      Andrew.nash(@roystonlaw.com
      Royston, Rayzor, Vickery & Williams, L.L.P.
      Pennzoil Place
      711 Louisiana Street, Suite 500
      Houston, Texas 77002-8380
      (713) 224-8380 — Telephone
      (713) 225-9945 — Facsimile
ATTORNEYS FOR STEWART TITLE GUARANTY COMPANY

                                               3
5766297.1
Appendix G
 If you want information about coverage or need assistance to resolve complaints, please call our toll free number: 1-800-729-1902. If you make a claim under your policy, you must
 furnish written notice In accordance with Section 3 of the Conditions and Stipulations. Visit our World Wide Web site at: http://www.stewart.com

                                                             LOAN POLICY OF TITLE INSURANCE
                                                                       ISSUED BY

                                                                  stewar
                                                                       title guaranty company

         Any notice of claim and any other notice or statement in writing required to be given the Company under this
         Policy must be given to the Company at thaddress shown in Section 17 of the Conditions.

                                                                           '''COVERED RISKS:

         SUBJECT TO THE EXCLUSIONS FROM COVERAVEJHE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B
         AND THE CONDITIONS, STEWART TITLE op,0001.7Komfaki,yi'.'470,4,pprporation (the "Company') insures, as of Date
         of Policy and, to the extent stated in CoyeredT*4141310004tOPate*?..plicy, against loss or damage, not exceeding
         the Amount of Insurance, sustained or ineUtredtftffeltia(tced.4.1:0.§oriip,

         t. Title being vested other than as stated50'!Sthedule,.,,
         2 Any defect in or lien or encumbrance ofithe7itle:;,ThIS'bovered4Riskindlikes
                                                            •                                  but is not limited to insurance against loss
         from:
             (a) A defect in the Title caused by:
                  (I) forgery, fraud, undue influence, dureskincompetencyoncapacity or impersonation;
                  (ii) failure of any person or Entity to have authorized a transfer or conveyance;
                  (iii) a document affecting Title not properly dreated, executed, .witnessed, sealed, acknowledged, notarized or
                  delivered;                                                                .„
                  (iv) failure to perform those acts niaceeSe itoi'create a doel.'ine,rithqefectronic means authorized by law;
                  (v) a document executed under a'gikalfjed,Iexpired or otheffiiSW,I0altid power of attorney;
                  (vi) a document not properly flied, 46Eid '15kindexed4t7the101iblib- 'ecords including failure to perform those acts
                  by electronic means authorized by4aWticri7
                  (vii) a detective judicial or administi1iVOproceedi4
             (b) The lien of real estate taxes or assessments                   e7.1W*'?a governmental authority due or payable, but
             unpaid.
             (c) Any encroachment, encumbrance, vidIalfir.-,!Nadation;•,or,adyersecircumstance affecting the Title that would be
             disclosed by an accurate and complete land*rVey                                  "encroachment" includes encroachments of
             existing improvements located on the Land tiritoS4jolning:'1ankic:..alid encroachments onto the Land of existing
             improvements located on adjoining land.
         3. Lack of good and indefeasible Title.
         4, No right of access to and from the Land.
         Covered Risks continued on next page,

             IN WITNESS WHEREOF, Stewart Title Guararity!Company::baa.:c4usad this policy to be signed and sealed by its duly
         authorized officers as of Date of Policy shown imScliedLiltiA

         Countersigned by:

                                                                                                                                    4,             r )0314:d
                                                                                                                                      WNW
                                                                                                                                Senior Chairman o the Boar
         Authorized Signature

         Service Title Company
                                                                                                                                     Chairman ofthe 8 rd
         Company

         San   Antonio, TX
         City, State                                                                                                                        President
                         „,4,
                       4n.`--$4.., SERVICE TITLE COMPANY
                                                  7334 Blanco Road                        Policy       NI-5952.000007292
                                                                                          Serie! No_
                                            San Antonio, Texas 78216
                                                    (210) 344-8820                                                                11BIT
                                     rm
7-2 Loan Policy (5-.                                                                     ID: 430029

                                                                                                                                                                              D-00156
                                                   COVERED RISKS CONTINUED FROM PAGE 1

 a The violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning)
 restricting, regulating, prohibiting or relating to:
       (a) the occupancy, use or enjoyment of the Land;
      (b) the character, dimensions or location of any improvement erected on the Land;
       (c) subdivision of land; or
      (d) environmental protection
 if a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the
 extent of the violation or enforcement referred to in that notice.
6. An enforcement action based on the exercise of a governmental police power not covered by Covered Risk 5 if a notice of the enforcement
action, describing any part of the Land, is recorded in the Public Records, but only to the extent of the enforcement referred to in that notice.
7. The exercise of the rights of eminent domain if a notice of the exercise, describing any part of the Land, is recorded in the Public Records.
B. Any taking by a governmental body that has occurred and is binding on the rights of a purchaser for value without Knowledge.
9. The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title, This Covered Risk includes but Is not limited to
insurance against loss from any of the following impairing the lien of the Insured Mortgage:
      (a) forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation;
      (b) failure of any person or Entity to have authorized a transfer or conveyance;
      (c) the Insured Mortgage not being property created, executed, witnessed, sealed, acknowledged, notarized or delivered;
      (d) failure to perform those acts necessary to create a document by electronic means authorized by law;
      (e) a document executed under a falsified, expired or otherwise invalid power of attorney;
      (f) a document not properly filed, recorded or indexed in the Public Records including failure to perform those acts by electronic means
      authorized by law; or
      (g) a defective judicial or administrative proceeding.
10. The lack of priority of the lien of the Insured Mortgage over any other lien or encumbrance.
11. The lack of priority of the lien of the Insured Mortgage
      (a) as security for each and every advance of proceeds of the loan secured by the Insured Mortgage over any statutory or constitutional
      mechanic's, contractor's, or materialman's lien for services, labor or material having its inception on or before Date of Policy; and
      (b) over the lien of any assessments for street improvements under construction or completed at Date of Policy.
12. The invalidity or unenforceability of any assignment of the Insured Mortgage, provided the assignment is shown in Schedule A, or the
failure of the assignment shown in Schedule A to vest title to the Insured Mortgage in the named Insured assignee free and clear of all liens.
13. The invalidity, unenforceability, lack of priority or avoidance of the lien of the Insured Mortgage:
      (a) resulting from the avoidance in whole or in part, or from a court order providing an alternative remedy, of any transfer of all or any part
      of the title to or any interest in the Land occurring prior to the transaction creating the lien of the Insured Mortgage because that prior transfer
      constituted a fraudulent or preferential transfer under federal bankruptcy, state insolvency or similar creditors' rights laws; or
      (b) because the Insured Mortgage constitutes a preferential transfer under federal bankruptcy, state insolvency or similar creditors' rights
      laws by reason of the failure of its recording in the Public Records:
           (i) to be timely, or
           (ii) to impart notice of its existence to a purchaser for value or a judgment or lien creditor.
14. Any defect In or lien or encumbrance on the Title or other matter included in Covered Risks 1 through 13 that has been created or attached
or has been flied or recorded in the Public Records subsequent to Date of Policy and prior to the recording of the Insured Mortgage in the Public
Records.
The Company will also pay the costs, attorneys' fees and expenses incurred in defense of any matter insured against by this Policy, but only to
the extent provided in the Conditions.

                                                         EXCLUSIONS FROM COVERAGE

The following matters are expressly excluded from the coverage of this policy and the Company will not pay loss or damage, costs, attorneys'
tees or expenses that arise by reason of:
1. (a) Any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating,
     prohibiting or relating to:
          (i) the occupancy, use, or enjoyment of the Land;
          (ii) the character, dimensions or location of any improvement erected on the Land;
          (iii) subdivision of land; or
          (iv) environmental protection;
     or the effect of any violation of these laws, ordinances or governmental regulations. This Exclusion 1(a) does not modify or limit the
     coverage provided under Covered Risk 5.
     (b) Any governmental police power. This Exclusion 1(b) does not modify or limit the coverage provided under Covered Risk 6.
2. Rights of eminent domain, This Exclusion does not modify or limit the coverage provided under Covered Risk 7 or 8.
3. Defects, liens, encumbrances, adverse claims or other matters:
    (a) created, suffered, assumed or agreed to by the Insured Claimant;
    (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed
     in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy;
    (c) resulting in no loss or damage to the Insured Claimant;
    (d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided under Covered Risk 11,
    13 or 14); or
     (e) resulting in loss or damage that would not have been sustained if the Insured Claimant had paid value for the Insured Mortgage.
4. Unentorceability of the lien of the Insured Mortgage because of the inability or failure of an Insured to comply with applicable doing
business laws of the state where the Land is situated.

                                                                         Page 2

                                                                                                                                                      D-00157
                                                EXCLUSIONS FROM COVERAGE CONTINUED FROM PAGE 2

5. Invalidity or unenforceabillty in whole or in part of the lien of the Insured Mortgage that arises out of the transaction evidenced by the
Insured Mortgage and is based upon usury or any consumer credit protection or truth in lending law.
6. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar creditors' rights laws, that the transaction creating
the lien of the Insured Mortgage, is:
     (a) a fraudulent conveyance or fraudulent transfer; or
     (b) a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy.
7. Any lien on the Title for real estate taxes or assessments imposed by governmental authority and created or attaching between Date of
Policy and the date of recording of the Insured Mortgage in the Public Records, This exclusion does not modify or limit the coverage provided
under Covered Risk 11(b),
8, The refusal of any person to purchase, lease or lend money on the estate or interest covered hereby in the land described in Schedule A
because of Unmarketable Title.

                                                                           CONDITIONS

1. DEFINITION OF TERMS.                                                                         have had against any predecessor Insured, unless the successor
    (a) "Amount of Insurance": the amount stated in Schedule A, as may be                       acquired the Indebtedness as a purchaser for value without
    increased or decreased by endorsement to this policy, increased by                          Knowledge of the asserted defect, lien, encumbrance or other matter
    Section 8(b), or decreased by Section 10 of these Conditions.                               insured against by this policy.
    (b) "Date of Policy": The date designated as "Date of Policy' in Schedule A.          (f) "Insured Claimant": an Insured claiming loss or damage.
    (c) "Entity": A corporation, partnership, trust, limited liability company or         (g) "Insured Mortgage": the Mortgage described in paragraph 4 of
    other similar legal entity.                                                           Schedule A.
    (d) "Indebtedness": The obligation secured by the Insured Mortgage                    (h) "Knowledge" or "Known": actual knowledge, not constructive
    including one evidenced by electronic means authorized by law, and if                 knowledge or notice that may be imputed to an Insured by reason of the
    that obligation is the payment of a debt, the Indebtedness is the sum of:             Public Records or any other records that impart constructive notice of
          (i) the amount of the principal disbursed as of Date of Policy;                 matters affecting the Title.
          (ii) the amount of the principal disbursed subsequent to Date of                (i) "Land": the land described in Schedule A, and affixed improvements
          Policy;                                                                         that by law constitute real property. The term "Land" does not include any
         (iii) construction loan advances made subsequent to Date of Policy               property beyond the lines of the area described in Schedule A, nor any
          for the purpose of financing in whole or in part the construction of an         right, title, interest, estate or easement in abutting streets, roads, avenues,
         improvement to the Land or related to the Land that the Insured was              alleys, lanes, ways or waterways, but this does not modify or limit the
          end continued to be obligated to advance at Date of Policy and at the           extent that a right of access to and from the Land is insured by this policy.
          date of the advance;                                                            (j) "Mortgage': mortgage, deed of trust, trust deed, or other security
          (iv) interest on the loan;                                                      instrument, including one evidenced by ;electronic means authorized by
          (v) prepayment premiums; exit tees and other similar fees or                    law.
          penalties allowed by law;                                                       (k) 'Public Records": records established under state statutes at Date
          (vi) expenses of foreclosure and any other costs of enforcement;                of Policy for the purpose of imparting constructive notice of matters relating
         (vii) amounts advanced to assure compliance with laws or to protect              to real property to purchasers for value and without Knowledge. With
          the lien or the priority of the lien of the Insured Mortgage before the         respect to Covered Risk 5(d), "Public Records" shall also include
         acquisition of the estate or interest in the Title;                              environmental protection liens filed in the records of the clerk of the
         (viii) amounts to pay taxes and insurance; and.                                  United States District Court for the district where the Land is located.
         (ix) reasonable amounts expended to prevent deterioration of                     (I) "Title": the estate or Interest .described in Schedule A.
         improvements; but reduced by the total of all payments and by any                (M) "Unmarketable Title": Title affected by an alleged or apparent matter
         amount forgiven by an Insured.                                                   that would permit a prospective purchaser or lessee of the Title or lender
         "Insured': the Insured named in Schedule A.                                      on the Title or a prospective purchaser of the Insured Mortgage to be
         (I) The term "Insured' also includes:                                            released from the obligation to purchase, lease or lend it there is a
                (A) the owner of the Indebtedness and each successor in                   contractual condition requiring the delivery of marketable title.
                ownership of the Indebtedness, whether the owner or successor
                owns the Indebtedness for its own account or as a trustee or         2.   CONTINUATION OF INSURANCE.
                other fiduciary, except a successor who is an obligor under the           The coverage of this policy shall continue in force as of Date of Policy in
                provisions of Section 12(c) of these Conditions;                          favor of an Insured after acquisition of the Title by an Insured or after
                (B) if the Indebtedness is evidenced by a "transferable record,"          conveyance by an Insured, but only so long as the Insured retains an
                the person or Entity who has "control" of the "transferable               estate or interest in the Land, or holds an obligation secured by a purchase
                record," as these terms are defined by applicable electronic              money Mortgage given by a purchaser from the Insured, or only so long
                transactions law;                                                         as the Insured shall have liability by reason of warranties in any transfer
                (C) successors to an Insured by dissolution, merger,                      or conveyance of the Title. This policy shall not continue in force in favor
                consolidation, distribution or reorganization;                            of any purchaser from the Insured of either (I) an estate or interest in the
                (D) successors to an Insured by its conversion to another                 Land, or (ii) an obligation secured by a purchase money Mortgage given
                kind of Entity;                                                           to the Insured.
                (E) a grantee of an Insured under a deed delivered without
                payment of actual valuable consideration conveying the Title:        3.   NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT.
                     (1) If the stock, shares, memberships, or other equity               The Insured shall notify the Company promptly in writing (i) in case of any
                     interests of the grantee are wholly-owned by the named               litigation as set forth in Section 5(a) below, or (ii) in case Knowledge shall
                     Insured,                                                             come to an Insured of any claim of title or interest that is adverse to the
                     (2) If the grantee wholly owns the named Insured, or                 Title or the lien of the Insured Mortgage, as insured, and that might cause
                     (3) If the grantee is wholly-owned by an affiliated Entity of        loss or damage for which the Company may be liable by virtue of this
                     the named Insured, provided the affiliated Entity and the            policy. If the Company is prejudiced by the failure of the Insured Claimant
                     named Insured are both wholly-owned by the same person               to provide prompt notice, the Company's liability to the Insured Claimant
                     or Entity;                                                           under the policy shall be reduced to the extent of the prejudice.
                (F) any government agency or instrumentality that is an insurer           Subject to the provisions of this policy, upon acquisition of all or any part
                or guarantor under an insurance contract or guaranty insuring             of the Title pursuant to the provisions of Section 2 of these Conditions,
                or guaranteeing the Indebtedness secured by the Insured                   when, after the Date of the Policy, the Insured notifies the Company as
                Mortgage, or any part of it, whether named as an Insured or not;          required herein of a lien, encumbrance, adverse claim or other defect in
         (ii) With regard to (A), (B), (C), (D) and (E) reserving, however, all           Title insured by this policy that is not excluded or excepted from the
         rights and defenses as to any successor that the Company would                   coverage of this policy, the Company shall promptly investigate the charge
                                                                               Page 3

                                                                                                                                                                       D-00158
                                                                      CONDITIONS Continued

      to determine whether the lien, encumbrance, adverse claim or defect or                Mortgage, or any other matter as insured. If the Company is prejudiced
      other matter is valid and not barred by law or statute. The Company shall             by the failure of the Insured to furnish the required cooperation, the
     notify the Insured in writing, within a reasonable time, of its determination          Company's obligations to the Insured under the policy shall terminate,
      as to the validity or invalidity of the Insured's claim or charge under the           including any liability or obligation to defend, prosecute, or continue any
     policy. If the Company concludes that the lien, encumbrance, adverse                   litigation, with regard to the matter or matters requiring such cooperation.
     claim or defect is not covered by this policy, or was otherwise addressed              (b) The Company may reasonably require the Insured Claimant to submit
     in the closing of the transaction in connection with which this policy was             to examination under oath by any authorized representative of the
     issued, the Company shall specifically advise the Insured of the reasons              Company and to produce for examination, inspection and copying, at
     for its determination. If the Company concludes that the lien, encumbrance,           such reasonable times and places as may be designated by the authorized
     adverse claim or defect is valid, the Company shall take one of the                   representative of the Company, all records, in whatever medium
     following actions: (I) institute the necessary proceedings to clear the lien,         maintained, including books, ledgers, checks, memoranda,
     encumbrance, adverse claim or defect from the Title as insured; (ii)                  correspondence, reports, e-mails, disks, tapes, and videos whether
     indemnify the Insured as provided in this policy; (iii) upon payment of               bearing a date before or after Date of Policy, that reasonably pertain to the
     appropriate premium and charges therefor, issue to the Insured Claimant               loss or damage. Further, If requested by any authorized representative of
     or to a subsequent owner, mortgagee or holder of the estate or interest in            the Company, the Insured Claimant shall grant its permission, in writing,
     the Land insured by this policy, a policy of title insurance without exception        for any authorized representative of the Company to examine, inspect
     for the lien, encumbrance, adverse claim or defect, said policy to be in an           and copy all of these records in the custody or control of a third party that
     amount equal to the current value of the Land or, if a mortgagee policy, the          reasonably pertain to the loss or damage. All information designated as
     amount of the loan; (iv) indemnify another title insurance company in                 confidential by the Insured Claimant provided to the Company pursuant
     connection with its issuance of a policy(ies) of title insurance without              to this Section shall not be disclosed to others unless, in the reasonable
     exception for the lien, encumbrance, adverse claim or detect; (v) secure              judgment of the Company, It is necessary in the administration of the
     a release or other document discharging the lien, encumbrance, adverse                claim. Failure of the Insured Claimant to submit for examination under
     claim or defect; or (vi) undertake a combination of (i) through (v) herein.           oath, produce any reasonably requested information or grant permission
                                                                                           to secure reasonably necessary information from third parties as required
4. PROOF OF LOSS.                                                                          in this subsection, unless prohibited by law or governmental regulation.
    In the event the Company is unable to determine the amount of loss or                  shall terminate any liability of the Company under this policy as to that claim.
    damage, the Company may, at its option, require as a condition of payment              (c) If the Insured demands that the Company accept a settlement offer
    that the Insured Claimant furnish a signed proof of loss. The proof of loss            that is not greater than the Amount of Insurance or if the Insured expressly
    must describe the defect, lien, encumbrance or other matter insured                    agrees that a settlement offer should be accepted, the Company has a
    against by this policy that constitutes the basis of loss or damage and                right to be reimbursed if it has timely asserted its reservation of rights and
    shall state, to the extent possible, the basis of calculating the amount of            notified the Insured that it intends to seek reimbursement if it pays to
    the loss or damage.                                                                    settle or defend a claim that is not covered by the policy.

5. DEFENSE AND PROSECUTION OF ACTIONS.                                                7.   OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION
    (a) Upon written request by the Insured, and subject to the options                    OF LIABILITY.
    contained in Sections 3 and 7 of these Conditions, the Company, at its                 In case of a claim under this policy, the Company shall have the following
    own cost and without unreasonable delay, shall provide for the defense of              additional options:
    an Insured in litigation In which any third party asserts a claim covered by           (a) To Pay or Tender Payment of the Amount of Insurance or to Purchase
    this policy adverse to the Insured. This obligation is.limited to only those           the Indebtedness.
    stated causes of action alleging matters insured against by this policy.                    (i) to pay or tender payment of the Amount of Insurance under this
    The Company shall have the right to select counsel of its choice (subject                   policy together with any costs, attorneys' tees and expenses incurred
    to the right of the Insured to object for reasonable cause) to represent the                by the Insured Claimant that were authorized by the Company up to
    Insured as to those stated causes of action. It shall not be liable for and                 the time of payment or tender of payment and that the Company is
    will not pay the fees of any other counsel. The Company will not pay any                    obligated to pay; or
    fees, costs or expenses incurred by the Insured in the defense of those                     (ii) to purchase the Indebtedness for the amount of the
    causes of action that allege matters not insured against by this policy.                    Indebtedness on the date of purchase, together with any costs,
    (b) The Company shall have the right, in addition to the options contained                  attorneys' fees and expenses incurred by the Insured Claimant that
    in Sections 3 and 7, at its own cost, to institute and prosecute any action                 were authorized by the Company up to the time of purchase and that
    or proceeding or to do any other act that in its opinion may be necessary                   the Company is obligated to pay,
    or desirable to establish the Title or the lien of the Insured Mortgage, as            When the Company purchases the Indebtedness, the Insured shall
    insured, or to prevent or reduce loss or damage to the Insured. The                    transfer, assign, and convey to the Company the Indebtedness and the
    Company may take any appropriate action under the terms of this policy,                Insured Mortgage, together with any collateral security.
    whether or not it shall be liable to the Insured. The exercise of these rights         Upon the exercise by the Company of either of the options provided for in
    shall not be an admission of liability or waiver of any provision of this              subsections (a)(1) or (ii), all liability and obligations of the Company to the
    policy. If the Company exercises its rights under this subsection, it must             Insured under this policy, other than to make the payment required in
    do so diligently.                                                                      those subsections, shall terminate, including any liability or obligation to
    (c) Whenever the Company brings an action or asserts a defense as                      defend, prosecute, or continue any litigation.
    required or permitted by this policy, the Company may pursue the litigation            (b) To Pay or Otherwise Settle With Parties Other than the Insured or
    to a final determination by a court of competent jurisdiction and it expressly         With the Insured Claimant.
    reserves the right, in its sole discretion, to appeal from any adverse                      (i) to pay or otherwise settle with other parties for or in the name of
    judgment or order. When the Company has reasonable grounds to dispute                        an Insured Claimant any claim insured against under this policy. In
    coverage tinder this policy, the Company may reserve its rights to pay                      addition, the Company will pay any costs, attorneys' fees and
    the claim and the costs of defense and seek reimbursement from the                           expenses incurred by the Insured Claimant that were authorized by
    Insured for all amounts paid for which there was no coverage.                               the Company up to the time of payment and that the Company is
                                                                                                obligated to pay; or
6. DUTY OF INSURED CLAIMANT TO COOPERATE.                                                       (ii) to pay or otherwise settle with the Insured Claimant the loss or
    (a) in all cases where this policy permits or requires the Company to                        damage provided for under this policy, together with any costs,
    prosecute or provide for the defense of any action or proceeding and any                    attorneys' fees and expenses incurred by the Insured Claimant that
    appeals, the Insured shall secure to the Company the right to so prosecute                   were authorized by the Company up to the time of payment and that
    or provide defense in the action or proceeding, including the right to use,                  the Company is obligated to pay.
    at its option. the name of the Insured for this purpose. Whenever requested            Upon the exercise by the Company of either of the options provided for in
    by the Company, the Insured, at the Company's expense, shall give the                  subsections (b)(i) or (ii), the Company's obligations to the Insured under
    Company all reasonable aid (i) in securing evidence, obtaining witnesses,              this policy for the claimed loss or damage, other than the payments
    prosecuting or defending the action or proceeding, or effecting settlement,            required to be made, shall terminate, including any liability or obligation to
    and (ii) in any other lawful act that in the opinion of the Company may be             defend, prosecute or continue any litigation.
    necessary or desirable to establish the Title, the lien of the Insured
                                                                             Page 4

                                                                                                                                                                    D-00159
                                                                         CONDITIONS Continued

5. DETERMINATION AND EXTENT OF LIABILITY.                                                      If a payment on account of a claim does not luny cover the loss of the
     This policy is a contract of indemnity against actual monetary loss or                    Insured Claimant, the Company shall defer the exercise of its right to
     damage sustained or incurred by the Insured Claimant who has suffered                     recover until after the Insured Claimant shall have recovered its loss.
     loss or damage by reason of matters insured against by this policy.                       (b) The Insured's Rights and Limitations.
     (a) The extent of liability of the Company for loss or damage under this                        (I) The owner of the Indebtedness may release or substitute the
    policy shall not exceed the least of:                                                            personal liability of any debtor or guarantor, extend or otherwise
          (i) the Amount of Insurance;                                                               modify the terms of payment, release a portion of the Title from the
          (ii) the Indebtedness;                                                                     lien of the Insured Mortgage, or release any collateral security for
          (iii) the difference between the value of the Title as insured and the                     the Indebtedness, if it does not affect the enforceability or priority of
          value of the Title subject to the risk insured against by this policy; or                  the lien of the Insured Mortgage.
          (iv) If a government agency or instrumentality is the Insured Claimant,                    (ii) If the Insured exercises a right provided in (b)(i), but has
          the amount it paid in the acquisition of the Title or the Insured Mortgage                 Knowledge of any claim adverse to the Title or the lien of the Insured
          in satisfaction of its insurance contract or guaranty.                                     Mortgage insured against by this policy, the Company shall be required
    (b) If the Company pursues Its rights under Section 3 or 5 and is                                to pay only that part of any losses insured against by this policy that
    unsuccessful in establishing the Title or the lien of the Insured Mortgage,                      shall exceed the amount, if any, lost to the Company by reason of the
    as insured,                                                                                     impairment by the Insured Claimant of the Company's right of subrogation.
          (i) the Amount of Insurance shall be increased by 10%, and                          (c) The Company's Rights Against Non-insured Obligors.
          (e) the Insured Claimant shall have the right to have the loss or                   The Company's right of subrogation includes the Insured's rights against
          damage determined either as of the date the claim was made by the                   non-insured obligors including the rights of the Insured to indemnities,
          Insured Claimant or as of the date it is settled and paid.                          guaranties, other policies of insurance or bonds, notwithstanding any
    (c) In the event the Insured has acquired the Title in the manner described               terms or conditions contained in those instruments that address
    in Section 2 of these Conditions or has conveyed the Title, then the extent               subrogation rights. The Company's right of subrogation shall not be avoided
    of liability of the Company shall continue as set forth in Section 8(a) of                by acquisition of the Insured Mortgage by an obligor (except an obligor
    these Conditions.                                                                         described in Section 1(e)(i)(F) of these Conditions) who acquires the
    (d) In addition to the extent of liability under (a), (b) and (c), the Company            Insured Mortgage as a result of an indemnity, guarantee, other policy of
    will also pay those costs, attorneys' fees and expenses incurred in                       insurance, or bond and the obligor will not be an Insured under this policy.
    accordance with Sections 5 and 7 of these Conditions.
                                                                                         13. ARBITRATION.
9. LIMITATION OF LIABILITY.                                                                  Either the Company or the Insured may demand that the claim or
     (a) If the Company establishes the Title, or removes the alleged defect,                controversy shall be submitted to arbitration pursuant to the Title Insurance
     lien or encumbrance, or cures the lack of a right of access to or from the              Arbitration Rules of the American Land Title Association ("Rules"). Except
     Land, or establishes the lien of the Insured Mortgage, all as insured, or               as provided in the Rules, there shall be no joinder or consolidation with
     takes action in accordance with Section 3 or 7, in a reasonably diligent                claims or controversies of other persons. Arbitrable matters may include,
     manner by any method, including litigation and the completion of any                    but are not limited to, any controversy or claim between the Company
     appeals, it shall have fully performed its obligations with respect to that             and the Insured arising out of or relating to this policy, any service in
     matter and shall not be liable for any loss or damage caused to the Insured.            connection with its issuance or the breach of a policy provision, or to any
     (b) In the event of any litigation, including litigation by the Company or              other controversy or claim arising out of the transaction giving rise to this
     with the Company's consent, the Company shall have no liability for loss                policy. All arbitrable matters when the Amount of Insurance is $2,000,000
     or damage until there has been a final determination by a court of competent            or less shall be arbitrated at the option of either the Company or the
     jurisdiction, and disposition of all appeals, adverse to the Title or to the lien       Insured, unless the Insured is an individual person (as distinguished from
     of the Insured Mortgage, as insured.                                                    an Entity). All arbitrable matters when the Amount of Insurance is in
     (c) The Company shall not be liable for loss or damage to the Insured for               excess of $2,000,000 shall be arbitrated only when agreed to by both the
     liability voluntarily assumed by the Insured in settling any claim or suit              Company and the Insured. Arbitration pursuant to this policy and under
     without the prior written consent of the Company.                                       the Rules shall be binding upon the parties. Judgment upon the award
                                                                                             rendered by the Arbitrator(s) may be entered in any court of competent
10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF                                      jurisdiction.
    LIABILITY.
    (a) All payments under this policy, except payments made for costs,                  14. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT.
     attorneys' fees and expenses, shall reduce the Amount of Insurance by                    (a) This policy together with all endorsements, if any, attached to it by
     the amount of the payment. However, any payments made prior to the                       the Company is the entire policy and contract between the Insured and
    acquisition of Title as provided in Section 2 of these Conditions shall not               the Company. In interpreting any provision of this policy, this policy shall
    reduce the Amount of Insurance afforded under this policy except to the                   be construed as a whole.
    extent that the payments reduce the Indebtedness.                                         (b) Any claim of loss or damage that arises out of the status of the Title
    (b) The voluntary satisfaction or release of the insured Mortgage shall                   or lien of the insured Mortgage or by any action asserting such claim,
    terminate all liability of the Company except as provided in Section 2 of                 shall be restricted to this policy.
     these Conditions.                                                                        (c) Any amendment of or endorsement to this policy must be in writing
                                                                                              and authenticated by an authorized person, or expressly incorporated by
11. PAYMENT OF LOSS.                                                                          Schedule A of this policy.
    When liability and the extent of loss or damage have been definitely fixed                (d) Each endorsement to this policy issued at any time is made a part of
    in accordance with these Conditions, the payment shall be made within                     this policy and is subject to all of its terms and provisions. Except as the
    30 days.                                                                                  endorsement expressly states, it does not (i) modify any of the terms and
                                                                                              provisions of the policy, (ii) modify any prior endorsement, (iii) extend the
12. RIGHTS OF RECOVERY UPON PAYMENT OR SETTLEMENT.                                            Date of Policy or (iv) increase the Amount of Insurance. Each Commitment,
     (a) The Company's Right to Recover.                                                      endorsement or other form, or provision in the Schedules to this policy
     Whenever the Company shall have settled and paid a claim under this                      that refers to a term defined in Section 1 of the Conditions shall be deemed
     policy, it shall be subrogated and entitled to the rights of the Insured                 to refer to the term regardless of whether the term is capitalized in the
     Claimant in the Title or Insured Mortgage and all other rights and remedies              Commitment, endorsement or other form, or Schedule. Each Commitment,
     in respect to the claim that the Insured Claimant has against any person                 endorsement or other form, or provision in the Schedules that refers to
     or property, to the extent of the amount of any loss, costs, attorneys' fees             the Conditions and Stipulations shall be deemed to refer to the Conditions
     and expenses paid by the Company. If requested by the Company, the                       of this policy.
     Insured Claimant shall execute documents to evidence the transfer to the
     Company of these rights and remedies. The Insured Claimant shall permit           15. SEVERABILITY.
     the Company to sue, compromise or settle in the name of the Insured                    In the event any provision of this policy, in whole or in part, is held invalid
     Claimant and to use the name of the Insured Claimant in any transaction                or unenforceable under applicable law, the policy shall be deemed not to
     or litigation involving these rights and remedies.                                     include that provision or such part held to be invalid and all other provisions
                                                                                            shall remain in full force and effect.
                                                                                   Page 5

                                                                                                                                                                        D-00160
                                                                        CONDITIONS Continued

16. CHOICE OF LAW; FORUM.
     (a) Choice of Law: The Insured acknowledges the Company has
     underwritten the risks covered by this policy and determined the premium
     charged therefor in reliance upon the law affecting interests in real property
     and applicable to the interpretation, rights, remedies or enforcement of
     policies of title insurance of the jurisdiction where the Land is located.
     Therefore, the court or an arbitrator shall apply the law of the jurisdiction
     where the Land is located to determine the validity of claims against the
     Title or the lien of the Insured Mortgage that are adverse to the Insured,
     and in interpreting and enforcing the terms of this policy. In neither case
     shall the court or arbitrator apply its conflicts of laws principles to determine
     the applicable law.
    (b) Choice of Forum: Any litigation or other proceeding brought by the
    Insured against the Company must be tiled only in a state or federal court
    within the United States of America or its territories having appropriate
    jurisdiction.

17. NOTICES, WHERE SENT.
     Any notice of claim and any other notice or statement in writing required
     to be given the Company under this Policy must be given to the Company
     at P.O. Box 2029, Houston, TX 77252-2029.

                                                                                 Page 6           stewarr
                                                                                               ._.._. t, Io gueranly company

                                                                                                                          D-00161
T-2 Loan Policy Schedules - Form Prescribed by Texas Department of Insurance - Revised 5/1/2008
Name and Address of Title Insurance Company: Stewart Title Guaranty Company, P.O. Box 2029, Houston, TX,
77252.

                                             Schedule A

 File No.: 0903012                                  Policy No.: M-5952-000007292

  Loan No.:

  Amount of Insurance: $900,000.00                  Premium: $125.00

 Date of Policy: September 8, 2009

 1. Name of Insured:

    D'Hanis State Bank, and each successor in ownership of the indebtedness secured by the
    insured mortgage, except a successor who is an obligor under the provisions of Section
    12(C) of the Conditions and Stipulations.

 2. The estate or interest in the Land that is encumbered by the Insured Mortgage is:

    Fee Simple.

 3. Title is insured as vested in:

    S A Eden Roc Apartments, LLC

 4. The Insured Mortgage, and its assignments, if any, are described as follows:

     Vendor's lien retained in deed dated September 4, 2009, executed by The Raul S. Cantu
     Family Limited Partnership No. 2 a/k/a The Raul S. Cantu No. 2 Family Limited
     Partnership, a Texas limited partnership to S A Eden Roc Apartments, LLC, a Texas
     Limited Liability Company, securing payment of one note in the principal amount of
     $900,000.00, payable to D'Hanis State Bank, said note additionally secured by deed of
     trust to Laurie Mayfield, Trustee, said deed of trust filed for record on September 8, 2009,
     under Bexar County Clerk's File No. 20090176216.

 5. The Land referred to in this policy is described as follows:

    A 0.916 of an acre, or 39,903 square feet, more or less, tract of land, being all of Lot 7,
    Block 13, New City Block 10060, EAST SHEARER HILLS ADDITION, situated in the City of
    San Antonio, Bexar County, Texas, according to plat thereof recorded in Volume 4500,
    Page 229, Deed and Plat Records of Bexar County, Texas. Said 0.916 of an acre being
    more particularly described by metes and bounds in Exhibit "A" attached hereto and made
    a part hereof for all intents and purposes.

                                         Schedule A - Page 1 of 2

                                                                                                           D-00162
6. This policy incorporates by reference those endorsements selected below:

  ❑ T-5 (Leasehold Mortgagee Policy Endorsement)
  ❑ T-17 (Planned Unit Development) The following subparagraph(s) of this endorsement
  are deleted:
  ❑ T-19 (Restrictions, Encroachments, Minerals) The following subparagraph(s) of this
  endorsement are deleted:
  E T-28 (Condominium) The following subparagraph(s) of this endorsement are deleted:
  C    T-33 (Variable Rate)
  ❑ T-33.1 (Variable Rate—Negative Amortization)
  ❑ T-35 (Revolving Credit/Future Advance)
  E T-36 (Environmental Protection Lien) Paragraph b refers to the following state
  statute(s): TEX. HEALTH & SAFETY CODE §361.194; TEX. HEALTH & SAFETY CODE
  §§342.007, 342,008; TEX. LOCAL GOV'T CODE §§214.0015(b), (d), AND (e), 214.001;
  TEX. NAT. RES. CODE §134.150, if applicable
  ❑ T-39 (Balloon Mortgage)
  ❑ T-42 (Equity Loan Mortgage) and subparagraph 2 (f) of the Equity Loan Mortgage
  Endorsement set forth in Procedural Rule P-44.C(2) E is ❑ is not added. The following
  subparagraph(s) of this endorsement are deleted:
  ❑ T-42.1 (Supplemental Coverage Equity Loan Mortgage) The following subparagraph(s)
  of this endorsement are deleted:
  ❑ T-43 (Texas Reverse Mortgage) The following subparagraph(s) of this endorsement are
  deleted:
   4 Section 13 of the Conditions of this policy, which relates to Arbitration, is hereby
  deleted.

SERVICE TITLE COMPANY

                                 Schedule A - Page 2 of 2

                                                                                            D-00163
         pAE- AWSON
        -HeilivaEscs
LAND DEVELOPMENT          ENVIRONMENTAL      1RANSPORTATION             WATER RESOURCES            SURVEYING

                                             FIELD NOTES
                                                 FOR

A 0.916 of an acre, or 39,903 square feet more or less, tract of land being all of Lot 7, BloCk 13,
New City Block (N.C.B.) 10060 of the East Shearer Hills Subdivision in the City of San
Antonio, Bexar County, Texas recorded in Volume 4500, Page 229 of the Deed and Plat Records
of Bexar County, Texas. Said 0.916 of an acre tract being more fully described as follows with
bearings being based on the North American Datum of 1983 (CORS 1996), from the Texas
Coordinate System established for the South Central Zone:

BEGINNING:          At a found 'A" iron rod, on the south right-of-way line of Dot Drive, the
                 . northeast corner of Lot 7, the northwest corner of Lot 8 of East Shearer Hills
                   Subdivision;

THENCE:            S 36°46'25" W, departing the south right-of-way line of Dot Drive, along and
                   with the east line of Lot 7 and the west line of Lot 8, a distance of 200.00 feet
                   to a set 1/4" iron rod with yellow cap marked "Pape-Dawson", the 'southeast
                   corner of       7, the southwest corner of Lot 8, the north right-of-way line of
                   Jackson-Kelller Road, a 60400t right-of-way, from which a found 1/4" iron rod
                   bears N 04°22'20" E, 0.52 feet;

THENCE:           N 53°13'35" W, along and with the south line of Lot 7 and the south right-of- .
                  way line. of Jackson-Kelller Road, a distance of 185.00 feet to a set 1/4" iron rod
                  with yellow cap marked "Pape-Dawson", the southwest corner of Lot 7, the
                  south end of the northeast cutback of Jackson-Kelller Road and the east right-
                  of-way line of Aribe Drive, a 60-foot right-of-way, from which a found 1/4"
                  iron rodbears S 81°56'59" E, 0.92 feet;

THENCE:           Northwesterly, along and with the east right-of-way line of Aribe Drive, along
                  a tangent curve to the right said curve having radius of 15.00 feet, a central
                  angle of90°00'00", a chord bearing and distance of N 08°13'35" W, 21.21 feet,
                  an arc length of 23.56 feet to a set 1/2" iron rod with yellow cap marked "Pape-
                  Dawson", from which a found 1/4" iron rod bears N 64°3 7'24" W, 1.05 feet;

THENCE:           N 36°46'25" E, along and with the east right-of-way line of Aribe Drive, a
                  distance of 170.00 feet to a set '/2" iron rod with yellow cap marked "Pape-
                  Dawson?', the south end of the southeast cutback of Aribe Drive and south
                  right-of-way lien of Dot Drive, from which a found '/2" iron rod bears N
                  59°29'02" W, 0.57 feet;

                                                           MICA'   nnutsavar,                      axes.aasa, yam,.

sau hitiD11111 / hDsiit
                           555 East Ramsey   San Antonio, Texas 78216 P. 210.375.9000 F 210.375 9010
WWVI.PAPE-DAWS011.0t4

                                                                                                                      D-00164
 0.916 of an Acre
 Project No. 9055-09
 Page 2 of 2

THENCE:            Northeasterly, along and with the south right-of-way line of Dot Drive, along a
                   tangent curve to the right said curve having radius of 15.00 feet, a central angle
                   of 90°00'00", a chord hearing and distance of N 81°4625" E, 21.21 feet, an arc
                   length of 23.56 feet to a set 'A" iron rod with yellow cap marked "Pape-
                   Dawson", the northwest corner of Lot 7, from which a found 'A" iron rod bears
                   N 15°43'02" E, 0.92 feet;

THENCE:            S 53°13'35'1 E, along and with the south right-of-way line of Dot Drive, a
                   distance of 185.00 feet to the POINT OF BEGINNING, and containing 0.916
                   of an acre in the City of San Antonio, Bexar County, Texas, Said tract being
                   described in accordance with a survey made on the ground and an exhibit
                   prepared by Pape-Dawson Engineers, Inc.

PREPARED BY:       Pape-Dawson Engineers, Inc.
JOB No.:           9055-09
                   March 17, 2009
DOC. ID.:          N:1Survey09\9-9100\9055-09\9055-09FN,doc

                                                                             PAPE-DAWS0
                                                                             ENSBNEERS
                                                                                                        D-00165
T-2 Loan Policy Schedules - Form Prescribed by Texas Department of Insurance - Revised 5/1/2008

                                         LOAN POLICY
                                         SCHEDULE B
                                  EXCEPTIONS FROM COVERAGE

  File No.: 0903012                                  Policy No.: M-5952-000007292

This policy does not insure against loss or damage (and the Company will not pay costs,
attorneys' fees or expenses) that arise by reason of the terms and conditions of the leases and
easements, if any, shown in Schedule A, and the following matters:

1. The following restrictive covenants of record itemized below, but the Company insures that
   any such restrictive covenants have not been violated so as to affect, and that future violation
   thereof will not affect, the validity or priority of the Insured Mortgage (insert specific recording
   data or delete this exception):

   Volume 2589, Page 147, Deed Records of Bexar County, Texas, deleting any unlawful
   discriminatory provisions based on race, color, religion, sex, handicap, familial status or
   national origin.

2. Any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments,
   or protrusions, or any overlapping of improvements.

3, Standby fees, taxes and assessments by any taxing authority for the year 2009, and
    subsequent years, but not those taxes or assessments for prior years because of an
   exemption granted to a previous owner of the property under Section 11.13, Texas Tax Code,
   or because of improvements not assessed for a previous tax year.

   _x_ Item 3 of Schedule B is hereby amended to add the following: "Company insures that
   standby fees, taxes and assessments by any taxing authority for the year 2009 are not yet
   due and payable."

4. Liens and leases that affect the title to the estate or interest, but that are subordinate to the
   lien of the Insured Mortgage.

5. (Insert here all other specific exceptions as to superior liens, easements, outstanding mineral
   and royalty interests, etc.)

   a. 25 foot front building setback line as set forth in Volume 2589, Page 147, Deed Records of
      Bexar County, Texas.

   b. Easement as set out in Volume 2625, Page 183, Deed Records of Bexar County, Texas.

   c. Cable TV Easement recorded in Volume 5008, Page 71, Real Property Records of Bexar
      County, Texas.

                                          Schedule B - Page 1 of 2

                                                                                                          D-00166
d. The following matters disclosed on survey dated March 2009, by PAPE-DAWSON
   ENGINEERS, Job No. 9055-09, including, but not limited to:

   i)     Encroachment of three 2 story brick buildings upon 25 foot front building setback
          line along Jackson-Keller Road
   ii)    Wood fence inset at northeast corner of lot along Dot Drive

e. Rights to oil, gas and other minerals of every kind and character in, on and under the
   property described in Schedule A, together with the rights, privileges and immunities
   relating thereto.

f. Any and all liens arising by reason of unpaid bills or claims for work performed or materials
    furnished in connection with improvements placed, or to be placed, upon the subject land.
    However, the Company does insure the Insured against loss, if any, sustained by the
    Insured under this Policy if such liens have been filed with the County Clerk of Bexar
    County, Texas, prior to the date hereof.

g. Pending disbursement of the full proceeds of the loan secured by the lien instrument set
   forth under Schedule A hereof, this policy insures only to the extent of the amount actually
   disbursed, but increases as each disbursement is made in good faith and without
   knowledge of any defects in, or objections to, the title up to the face amount of the policy.
   Nothing contained in this paragraph shall be construed as limiting any exception under
   Schedule B, or any printed provision of the policy.

h. Any and all unrecorded leases and rights of parties therein.

                                  Schedule B - Page 2 of 2

                                                                                               D-00167
                                  r-stewart
                                         +title guaranty company
                IMPORTANT NOTICE                                            AVISO IMPORTANTE

To obtain information or make a complaint:                   Para obtener informacion o para someter una queja:

1.You may contact your title insurance agent at              1.Puede comunicarse con su agente de seguro de
(telephone number)                                           titulo al (telephone number).

2. You may call Stewart Tide Guaranty Company's              2. Usted puede Hamar al numero de telefono gratis de
toll-free telephone number for information or to make a      Stewart Title Guaranty Company para informacion o
complaint at:                                                para someter una queja al:

                     (800) 729-1900                                              (800) 729-1900

3. You may also write to Stewart Title Guaranty              3. Usted tambien puede escribir a Stewart Title Guaranty
Company at P. 0. Box 2029, Houston, TX 77252-2029            Company, P 0. Box 2029, Houston, TX 77252-2029

4. You may contact the Texas Department of Insurance         4. Puede comunicarse con el Departamento de Seguros
to obtain information on companies, rights or                de Texas para obtener inforrnacion acerca de
complaints at:                                               companias, coberturas, derechos o quejas al:

                    1-800-252-3439                                              1-800-252-3439

5. You may write the Texas Department of Insurance:          5. Puede escribir al Departamento de Seguros de Texas:
                  P.O. Box 149104                                                P.O. Box 149104
              Austin, TX 78714-9104                                          Austin, TX 78714-9104
                Fax: (512) 475-1771                                            Fax: (512) 475-1771
           Web: http://www.tdi.state.tx.us                               Web: http://www.tdi.state.tx.us
     E-mail: ConsumerProtection@tdi.state.tx.us                   E-mail: ConsumerProtection@tdi.state.tx.us

PREMIUM OR CLAIM DISPUTES:                                   DISPUTAS SOBRE PRIMAS 0 RECLAMOS:

Should you have a dispute concerning your                    Si tiene una disputa concerniente a su prima o a un
premium or about a claim you should contact the title        reclamo, debe comunicarse con el agente de seguro
insurance agent first. If the dispute is not resolved, you   de titulo primero. Si no se resuelve la disputa, puede
may contact the Texas Department of Insurance,               entonces comunicarse con el departamento (TDI).

ATTACH THIS NOTICE TO YOUR POLICY:                           UNA ESTE AVISO A SU POLIZA:

This notice is for information only and does not be-         Este aviso es solo para proposito de informacion y no se
come a part or condition of the attached document.           convierte en parte o condicion del documento adjunto.

                                                                                                                        D-00168
Appendix H
                          LOAN POLICY OF TITLE INSURANCE (Form T-2)
                                          Issued by

                                    Blank Title Insurance Company

Any notice of claim and any other notice or statement in writing required to be given the
Company under this Policy must be given to the Company at the address shown in
Section 17 of the Conditions.

                                            COVERED RISKS

SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM
COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS, BLANK TITLE
INSURANCE COMPANY, a Blank corporation (the “Company”) insures, as of Date of Policy
and, to the extent stated in Covered Risks 11, 13 and 14, after Date of Policy, against loss or
damage, not exceeding the Amount of Insurance, sustained or incurred by the Insured by
reason of:
1. Title being vested other than as stated in Schedule A.
2. Any defect in or lien or encumbrance on the Title. This Covered Risk includes but is not
limited to insurance against loss from:
           (a) A defect in the Title caused by:
                  (i) forgery, fraud, undue influence, duress, incompetency, incapacity or
                  impersonation;
                  (ii) failure of any person or Entity to have authorized a transfer or conveyance;
                  (iii) a document affecting Title not properly created, executed, witnessed, sealed,
                  acknowledged, notarized or delivered;
                  (iv) failure to perform those acts necessary to create a document by electronic
                  means authorized by law;
                  (v) a document executed under a falsified, expired or otherwise invalid power of
                  attorney;
                  (vi) a document not properly filed, recorded or indexed in the Public Records
                  including failure to perform those acts by electronic means authorized by law; or
                  (vii) a defective judicial or administrative proceeding.
           (b) The lien of real estate taxes or assessments imposed on the Title by a governmental
           authority due or payable, but unpaid.
           (c) Any encroachment, encumbrance, violation, variation, or adverse circumstance
           affecting the Title that would be disclosed by an accurate and complete land survey of
           the Land. The term “encroachment” includes encroachments of existing improvements
           located on the Land onto adjoining land, and encroachments onto the Land of existing
           improvements located on adjoining land.
3. Lack of good and indefeasible Title.
4. No right of access to and from the Land.

Form T-2                                    Sec. II                     Effective January 3, 2014
5. The violation or enforcement of any law, ordinance, permit, or governmental regulation
(including those relating to building and zoning) restricting, regulating, prohibiting or relating to:
           (a) the occupancy, use or enjoyment of the Land;
           (b) the character, dimensions or location of any improvement erected on the Land;
           (c) subdivision of land; or
           (d) environmental protection
if a notice, describing any part of the Land, is recorded in the Public Records setting forth the
violation or intention to enforce, but only to the extent of the violation or enforcement referred
to in that notice.
6. An enforcement action based on the exercise of a governmental police power not covered
by Covered Risk 5 if a notice of the enforcement action, describing any part of the Land, is
recorded in the Public Records, but only to the extent of the enforcement referred to in that
notice.
7. The exercise of the rights of eminent domain if a notice of the exercise, describing any part
of the Land, is recorded in the Public Records.
8. Any taking by a governmental body that has occurred and is binding on the rights of a
purchaser for value without Knowledge.
9. The invalidity or unenforceability of the lien of the Insured Mortgage upon the Title. This
Covered Risk includes but is not limited to insurance against loss from any of the following
impairing the lien of the Insured Mortgage:
           (a) forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation;
           (b) failure of any person or Entity to have authorized a transfer or conveyance;
           (c) the Insured Mortgage not being properly created, executed, witnessed, sealed,
           acknowledged, notarized or delivered;
           (d) failure to perform those acts necessary to create a document by electronic means
           authorized by law;
           (e) a document executed under a falsified, expired or otherwise invalid power of
           attorney;
           (f) a document not properly filed, recorded or indexed in the Public Records including
           failure to perform those acts by electronic means authorized by law; or
           (g) a defective judicial or administrative proceeding.
10. The lack of priority of the lien of the Insured Mortgage over any other lien or encumbrance.
11. The lack of priority of the lien of the Insured Mortgage
           (a) as security for each and every advance of proceeds of the loan secured by the
           Insured Mortgage over any statutory or constitutional mechanic’s, contractor’s, or
           materialman’s lien for services, labor or material having its inception on or before Date
           of Policy ; and
           (b) over the lien of any assessments for street improvements under construction or
           completed at Date of Policy.

Form T-2                                    Sec. II                  Effective January 3, 2014
12. The invalidity or unenforceability of any assignment of the Insured Mortgage, provided the
assignment is shown in Schedule A, or the failure of the assignment shown in Schedule A to
vest title to the Insured Mortgage in the named Insured assignee free and clear of all liens.
13. The invalidity, unenforceability, lack of priority or avoidance of the lien of the Insured
Mortgage:

           (a) resulting from the avoidance in whole or in part, or from a court order providing an
           alternative remedy, of any transfer of all or any part of the title to or any interest in the
           Land occurring prior to the transaction creating the lien of the Insured Mortgage
           because that prior transfer constituted a fraudulent or preferential transfer under federal
           bankruptcy, state insolvency or similar creditors’ rights laws; or

           (b) because the Insured Mortgage constitutes a preferential transfer under federal
           bankruptcy, state insolvency or similar creditors’ rights laws by reason of the failure of
           its recording in the Public Records:
                   (i) to be timely, or
                   (ii) to impart notice of its existence to a purchaser for value or a judgment or lien
                   creditor.

14. Any defect in or lien or encumbrance on the Title or other matter included in Covered Risks
1 through 13 that has been created or attached or has been filed or recorded in the Public
Records subsequent to Date of Policy and prior to the recording of the Insured Mortgage in the
Public Records.
The Company will also pay the costs, attorneys' fees and expenses incurred in defense of any
matter insured against by this Policy, but only to the extent provided in the Conditions.
[Witness clause optional]

BLANK TITLE INSURANCE COMPANY

                                                             By
                                                             President

                                                             By
                                                             Secretary

                                    EXCLUSIONS FROM COVERAGE

     The following matters are expressly excluded from the coverage of this policy and the
Company will not pay loss or damage, costs, attorneys' fees or expenses that arise by reason
of:
1.     (a) Any law, ordinance, permit, or governmental regulation (including those relating to
building and zoning) restricting, regulating, prohibiting or relating to:
                  (i) the occupancy, use, or enjoyment of the Land;
                  (ii) the character, dimensions or location of any improvement erected on the
                  Land;
                  (iii) subdivision of land; or
                  (iv) environmental protection;

Form T-2                                      Sec. II                    Effective January 3, 2014
or the effect of any violation of these laws, ordinances or governmental regulations. This
Exclusion 1(a) does not modify or limit the coverage provided under Covered Risk 5.
           (b) Any governmental police power. This Exclusion 1(b) does not modify or limit the
           coverage provided under Covered Risk 6.
2. Rights of eminent domain. This Exclusion does not modify or limit the coverage provided
under Covered Risk 7 or 8.
3. Defects, liens, encumbrances, adverse claims or other matters:
           (a) created, suffered, assumed or agreed to by the Insured Claimant;
           (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but
           Known to the Insured Claimant and not disclosed in writing to the Company by the
           Insured Claimant prior to the date the Insured Claimant became an Insured under this
           policy;
           (c) resulting in no loss or damage to the Insured Claimant;
           (d) attaching or created subsequent to Date of Policy (however, this does not modify or
           limit the coverage provided under Covered Risk 11, 13 or 14); or
           (e) resulting in loss or damage that would not have been sustained if the Insured
           Claimant had paid value for the Insured Mortgage.
4. Unenforceability of the lien of the Insured Mortgage because of the inability or failure of an
Insured to comply with applicable doing business laws of the state where the Land is situated.
5. Invalidity or unenforceability in whole or in part of the lien of the Insured Mortgage that
arises out of the transaction evidenced by the Insured Mortgage and is based upon usury or
any consumer credit protection or truth in lending law.
6. Any claim, by reason of the operation of federal bankruptcy, state insolvency, or similar
creditors’ rights laws, that the transaction creating the lien of the Insured Mortgage, is:
           (a) a fraudulent conveyance or fraudulent transfer; or
           (b) a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy.
7. Any lien on the Title for real estate taxes or assessments imposed by governmental
authority and created or attaching between Date of Policy and the date of recording of the
Insured Mortgage in the Public Records. This exclusion does not modify or limit the coverage
provided under Covered Risk 11(b).
8. The refusal of any person to purchase, lease or lend money on the estate or interest
covered hereby in the land described in Schedule A because of Unmarketable Title.

                                              SCHEDULE A

Name and Address of Title Insurance Company:
[File No.: ] Policy No.:
Loan No.:
[Address for Reference only:]
Amount of Insurance: $ [Premium: $ ]
Date of Policy: [at a.m./p.m.]

1. Name of Insured:

Form T-2                                    Sec. II                    Effective January 3, 2014
2. The estate or interest in the Land that is encumbered by the Insured Mortgage is:

3. Title is insured as vested in:

4. The Insured Mortgage, and its assignments, if any, are described as follows:

5. The Land referred to in this policy is described as follows:

6. This policy incorporates by reference those endorsements selected below:

T-5 (Leasehold Loan Policy Endorsement)
T-17 (Planned Unit Development)
T-19 (Restrictions, Encroachments, Minerals)
T-19.2 (Minerals and Surface Damage)
T-19.3 (Minerals and Surface Damage)
T-28 (Condominium)
T-31 (Manufactured Housing) referring to manufactured housing unit serial number _______
T-31.1 (Supplemental Coverage Manufactured Housing Unit)
T-33 (Variable Rate)
T-33.1 (Variable Rate--Negative Amortization)
T-35 (Revolving Credit/Future Advance)
T-36 (Environmental Protection Lien) Paragraph b refers to the following state statute(s):
T-39 (Balloon Mortgage)
T-42 (Equity Loan Mortgage) and subparagraph 2(f) of the Equity Loan Mortgage
Endorsement set forth in Procedural Rule P-44.C(2) __ is ___ is not added.
T-42.1 (Supplemental Coverage Equity Loan Mortgage)
T-43 (Texas Reverse Mortgage)
Section 13 of the Conditions of this policy, which relates to Arbitration, is hereby deleted.

[The Company may insert or preprint all or part of paragraph 6 as applicable and may delete
boxes or substitute lines for boxes. The Company also may substitute the following at the
beginning of paragraph 6: “This policy incorporates by reference those endorsements shown
below:”]

                                          SCHEDULE B
File No.                                                                     Policy No.

EXCEPTIONS FROM COVERAGE

This policy does not insure against loss or damage (and the Company will not pay costs,
attorneys’ fees or expenses) that arise by reason of the terms and conditions of leases and
easements, if any, shown in Schedule A, and the following matters:
1. The following restrictive covenants of record itemized below, but the Company insures that
any such restrictive covenants have not been violated so as to affect, and that future violation
thereof will not affect, the validity or priority of the Insured Mortgage (insert specific recording
data or delete this exception):

Form T-2                                Sec. II                    Effective January 3, 2014
2. Any discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments
or protrusions, or any overlapping of improvements.
          Item 2 of Schedule B is hereby amended to read: “shortages in area”.
3. Standby fees, taxes and assessments by any taxing authority for the year ___, and
subsequent years; and subsequent taxes and assessments by any taxing authority for prior
years due to change in land usage or ownership, but not those taxes or assessments for prior
years because of an exemption granted to a previous owner of the property under Section
11.13, Texas Tax Code, or because of improvements not assessed for a previous tax year.
     Item 3 of Schedule B is hereby amended to delete: “and subsequent taxes and
assessments by any taxing authority for prior years due to change in land usage or
ownership,”
     Item 3 of Schedule B is hereby amended to add the following: “Company insures that
standby fees, taxes and assessments by any taxing authority for the year ____ are not yet due
and payable.”
4. Liens and leases that affect the Title, but that are subordinate to the lien of the Insured
Mortgage.
5. (Insert here all other specific exceptions as to superior liens, easements, outstanding
mineral and royalty interests, etc.)
[The Company may substitute lines for boxes or delete the boxes and incorporate any
applicable change to the exception above in the exception.]

                                                CONDITIONS
1. DEFINITION OF TERMS.
           (a) “Amount of Insurance”: the amount stated in Schedule A, as may be increased or
           decreased by endorsement to this policy, increased by Section 8(b), or decreased by
           Section 10 of these Conditions.
           (b) “Date of Policy”: The date designated as “Date of Policy” in Schedule A.
           (c) “Entity”: A corporation, partnership, trust, limited liability company or other similar
           legal entity.
           (d) “Indebtedness”: The obligation secured by the Insured Mortgage including one
           evidenced by electronic means authorized by law, and if that obligation is the payment
           of a debt, the Indebtedness is the sum of:
                 (i) the amount of the principal disbursed as of Date of Policy;
                 (ii) the amount of the principal disbursed subsequent to Date of Policy;
                 (iii) construction loan advances made subsequent to Date of Policy for the
                 purpose of financing in whole or in part the construction of an improvement to the
                 Land or related to the Land that the Insured was and continued to be obligated to
                 advance at Date of Policy and at the date of the advance;
                 (iv) interest on the loan;
                 (v) prepayment premiums, exit fees and other similar fees or penalties allowed by
                 law;
                 (vi) expenses of foreclosure and any other costs of enforcement;

Form T-2                                      Sec. II                 Effective January 3, 2014
                 (vii) amounts advanced to assure compliance with laws or to protect the lien or
                 the priority of the lien of the Insured Mortgage before the acquisition of the estate
                 or interest in the Title;
                 (viii) amounts to pay taxes and insurance; and,
                 (ix) reasonable amounts expended to prevent deterioration of improvements; but
                 reduced by the total of all payments and by any amount forgiven by an Insured.
           (e) “Insured": the Insured named in Schedule A.
                 (i) The term "Insured" also includes:
                        (A) the owner of the Indebtedness and each successor in ownership of the
                        Indebtedness, whether the owner or successor owns the Indebtedness for
                        its own account or as a trustee or other fiduciary, except a successor who
                        is an obligor under the provisions of Section 12(c) of these Conditions;
                        (B) if the Indebtedness is evidenced by a “transferable record,” the person
                        or Entity who has “control” of the “transferable record,” as these terms are
                        defined by applicable electronic transactions law;
                        (C) successors to an Insured by dissolution, merger, consolidation,
                        distribution or reorganization;
                        (D) successors to an Insured by its conversion to another kind of Entity;
                        (E) a grantee of an Insured under a deed delivered without payment of
                        actual valuable consideration conveying the Title:
                               (1) If the stock, shares, memberships, or other equity interests of
                               the grantee are wholly-owned by the named Insured,
                               (2) If the grantee wholly owns the named Insured, or
                               (3) If the grantee is wholly-owned by an affiliated Entity of the
                               named Insured, provided the affiliated Entity and the named
                               Insured are both wholly-owned by the same person or Entity;
                        (F) any government agency or instrumentality that is an insurer or
                        guarantor under an insurance contract or guaranty insuring or
                        guaranteeing the Indebtedness secured by the Insured Mortgage, or any
                        part of it, whether named as an Insured or not;
                 (ii) With regard to (A), (B), (C), (D) and (E) reserving, however, all rights and
                 defenses as to any successor that the Company would have had against any
                 predecessor Insured, unless the successor acquired the Indebtedness as a
                 purchaser for value without Knowledge of the asserted defect, lien, encumbrance
                 or other matter insured against by this policy.
           (f) "Insured Claimant": an Insured claiming loss or damage.
           (g) “Insured Mortgage”: the Mortgage described in paragraph 4 of Schedule A.
           (h) "Knowledge" or "Known": actual knowledge, not constructive knowledge or notice
           that may be imputed to an Insured by reason of the Public Records or any other records
           that impart constructive notice of matters affecting the Title.
           (i) "Land": the land described in Schedule A, and affixed improvements that by law
           constitute real property. The term "Land” does not include any property beyond the lines
Form T-2                                   Sec. II                    Effective January 3, 2014
           of the area described in Schedule A, nor any right, title, interest, estate or easement in
           abutting streets, roads, avenues, alleys, lanes, ways or waterways, but this does not
           modify or limit the extent that a right of access to and from the Land is insured by this
           policy.
           (j) "Mortgage": mortgage, deed of trust, trust deed, or other security instrument,
           including one evidenced by electronic means authorized by law.
           (k) "Public Records": records established under state statutes at Date of Policy for the
           purpose of imparting constructive notice of matters relating to real property to
           purchasers for value and without Knowledge. With respect to Covered Risk 5(d), "Public
           Records" shall also include environmental protection liens filed in the records of the
           clerk of the United States District Court for the district where the Land is located.
           (l) “Title”: the estate or interest described in Schedule A.
           (m) "Unmarketable Title”: Title affected by an alleged or apparent matter that would
           permit a prospective purchaser or lessee of the Title or lender on the Title or a
           prospective purchaser of the Insured Mortgage to be released from the obligation to
           purchase, lease or lend if there is a contractual condition requiring the delivery of
           marketable title.
2. CONTINUATION OF INSURANCE.
The coverage of this policy shall continue in force as of Date of Policy in favor of an Insured
after acquisition of the Title by an Insured or after conveyance by an Insured, but only so long
as the Insured retains an estate or interest in the Land, or holds an obligation secured by a
purchase money Mortgage given by a purchaser from the Insured, or only so long as the
Insured shall have liability by reason of warranties in any transfer or conveyance of the Title.
This policy shall not continue in force in favor of any purchaser from the Insured of either (i) an
estate or interest in the Land, or (ii) an obligation secured by a purchase money Mortgage
given to the Insured.
3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT.
The Insured shall notify the Company promptly in writing (i) in case of any litigation as set forth
in Section 5(a) below, or (ii) in case Knowledge shall come to an Insured of any claim of title or
interest that is adverse to the Title or the lien of the Insured Mortgage, as insured, and that
might cause loss or damage for which the Company may be liable by virtue of this policy. If the
Company is prejudiced by the failure of the Insured Claimant to provide prompt notice, the
Company's liability to the Insured Claimant under the policy shall be reduced to the extent of
the prejudice.
Subject to the provisions of this policy, upon acquisition of all or any part of the Title pursuant
to the provisions of Section 2 of these Conditions, when, after the Date of the Policy, the
Insured notifies the Company as required herein of a lien, encumbrance, adverse claim or
other defect in Title insured by this policy that is not excluded or excepted from the coverage of
this policy, the Company shall promptly investigate the charge to determine whether the lien,
encumbrance, adverse claim or defect or other matter is valid and not barred by law or statute.
The Company shall notify the Insured in writing, within a reasonable time, of its determination
as to the validity or invalidity of the Insured's claim or charge under the policy. If the Company
concludes that the lien, encumbrance, adverse claim or defect is not covered by this policy, or
was otherwise addressed in the closing of the transaction in connection with which this policy
was issued, the Company shall specifically advise the Insured of the reasons for its
determination. If the Company concludes that the lien, encumbrance, adverse claim or defect
Form T-2                                     Sec. II                      Effective January 3, 2014
is valid, the Company shall take one of the following actions: (i) institute the necessary
proceedings to clear the lien, encumbrance, adverse claim or defect from the Title as insured;
(ii) indemnify the Insured as provided in this policy; (iii) upon payment of appropriate premium
and charges therefor, issue to the Insured Claimant or to a subsequent owner, mortgagee or
holder of the estate or interest in the Land insured by this policy, a policy of title insurance
without exception for the lien, encumbrance, adverse claim or defect, said policy to be in an
amount equal to the current value of the Land or, if a loan policy, the amount of the loan; (iv)
indemnify another title insurance company in connection with its issuance of a policy(ies) of
title insurance without exception for the lien, encumbrance, adverse claim or defect; (v) secure
a release or other document discharging the lien, encumbrance, adverse claim or defect; or
(vi) undertake a combination of (i) through (v) herein.

4. PROOF OF LOSS.
In the event the Company is unable to determine the amount of loss or damage, the Company
may, at its option, require as a condition of payment that the Insured Claimant furnish a signed
proof of loss. The proof of loss must describe the defect, lien, encumbrance or other matter
insured against by this policy that constitutes the basis of loss or damage and shall state, to
the extent possible, the basis of calculating the amount of the loss or damage.

5. DEFENSE AND PROSECUTION OF ACTIONS.
(a) Upon written request by the Insured, and subject to the options contained in Sections 3 and
7 of these Conditions, the Company, at its own cost and without unreasonable delay, shall
provide for the defense of an Insured in litigation in which any third party asserts a claim
covered by this policy adverse to the Insured. This obligation is limited to only those stated
causes of action alleging matters insured against by this policy. The Company shall have the
right to select counsel of its choice (subject to the right of the Insured to object for reasonable
cause) to represent the Insured as to those stated causes of action. It shall not be liable for
and will not pay the fees of any other counsel. The Company will not pay any fees, costs or
expenses incurred by the Insured in the defense of those causes of action that allege matters
not insured against by this policy.

(b) The Company shall have the right, in addition to the options contained in Sections 3 and 7,
at its own cost, to institute and prosecute any action or proceeding or to do any other act that
in its opinion may be necessary or desirable to establish the Title or the lien of the Insured
Mortgage, as insured, or to prevent or reduce loss or damage to the Insured. The Company
may take any appropriate action under the terms of this policy, whether or not it shall be liable
to the Insured. The exercise of these rights shall not be an admission of liability or waiver of
any provision of this policy. If the Company exercises its rights under this subsection, it must
do so diligently.

(c) Whenever the Company brings an action or asserts a defense as required or permitted by
this policy, the Company may pursue the litigation to a final determination by a court of
competent jurisdiction and it expressly reserves the right, in its sole discretion, to appeal from
any adverse judgment or order.

6. DUTY OF INSURED CLAIMANT TO COOPERATE.
(a) In all cases where this policy permits or requires the Company to prosecute or provide for
the defense of any action or proceeding and any appeals, the Insured shall secure to the
Company the right to so prosecute or provide defense in the action or proceeding, including
Form T-2                                Sec. II                    Effective January 3, 2014
the right to use, at its option, the name of the Insured for this purpose. Whenever requested by
the Company, the Insured, at the Company's expense, shall give the Company all reasonable
aid (i) in securing evidence, obtaining witnesses, prosecuting or defending the action or
proceeding, or effecting settlement, and (ii) in any other lawful act that in the opinion of the
Company may be necessary or desirable to establish the Title, the lien of the Insured
Mortgage, or any other matter as insured. If the Company is prejudiced by the failure of the
Insured to furnish the required cooperation, the Company's obligations to the Insured under the
policy shall terminate, including any liability or obligation to defend, prosecute, or continue any
litigation, with regard to the matter or matters requiring such cooperation.

(b) The Company may reasonably require the Insured Claimant to submit to examination under
oath by any authorized representative of the Company and to produce for examination,
inspection and copying, at such reasonable times and places as may be designated by the
authorized representative of the Company, all records, in whatever medium maintained,
including books, ledgers, checks, memoranda, correspondence, reports, e-mails, disks, tapes,
and videos whether bearing a date before or after Date of Policy, that reasonably pertain to the
loss or damage. Further, if requested by any authorized representative of the Company, the
Insured Claimant shall grant its permission, in writing, for any authorized representative of the
Company to examine, inspect and copy all of these records in the custody or control of a third
party that reasonably pertain to the loss or damage. All information designated as confidential
by the Insured Claimant provided to the Company pursuant to this Section shall not be
disclosed to others unless, in the reasonable judgment of the Company, it is necessary in the
administration of the claim. Failure of the Insured Claimant to submit for examination under
oath, produce any reasonably requested information or grant permission to secure reasonably
necessary information from third parties as required in this subsection, unless prohibited by
law or governmental regulation, shall terminate any liability of the Company under this policy
as to that claim.

7. OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY.

In case of a claim under this policy, the Company shall have the following additional options:

(a) To Pay or Tender Payment of the Amount of Insurance or to Purchase the Indebtedness.
       (i) to pay or tender payment of the Amount of Insurance under this policy together with
       any costs, attorneys' fees and expenses incurred by the Insured Claimant that were
       authorized by the Company up to the time of payment or tender of payment and that the
       Company is obligated to pay; or

           (ii) to purchase the Indebtedness for the amount of the Indebtedness on the date of
           purchase, together with any costs, attorneys' fees and expenses incurred by the Insured
           Claimant that were authorized by the Company up to the time of purchase and that the
           Company is obligated to pay.

           When the Company purchases the Indebtedness, the Insured shall transfer, assign, and
           convey to the Company the Indebtedness and the Insured Mortgage, together with any
           collateral security.

           Upon the exercise by the Company of either of the options provided for in subsections
           (a)(i) or (ii), all liability and obligations of the Company to the Insured under this policy,

Form T-2                                    Sec. II                     Effective January 3, 2014
           other than to make the payment required in those subsections, shall terminate, including
           any liability or obligation to defend, prosecute, or continue any litigation.
(b) To Pay or Otherwise Settle With Parties Other than the Insured or With the Insured
     Claimant.
           (i) to pay or otherwise settle with other parties for or in the name of an Insured Claimant
           any claim insured against under this policy. In addition, the Company will pay any costs,
           attorneys' fees and expenses incurred by the Insured Claimant that were authorized by
           the Company up to the time of payment and that the Company is obligated to pay; or
           (ii) to pay or otherwise settle with the Insured Claimant the loss or damage provided for
           under this policy, together with any costs, attorneys' fees and expenses incurred by the
           Insured Claimant that were authorized by the Company up to the time of payment and
           that the Company is obligated to pay.
           Upon the exercise by the Company of either of the options provided for in subsections
           (b)(i) or (ii), the Company's obligations to the Insured under this policy for the claimed
           loss or damage, other than the payments required to be made, shall terminate, including
           any liability or obligation to defend, prosecute or continue any litigation.
8. DETERMINATION AND EXTENT OF LIABILITY.
This policy is a contract of indemnity against actual monetary loss or damage sustained or
incurred by the Insured Claimant who has suffered loss or damage by reason of matters
insured against by this policy.
(a) The extent of liability of the Company for loss or damage under this policy shall not exceed
the least of:
           (i) the Amount of Insurance;
           (ii) the Indebtedness;
           (iii) the difference between the value of the Title as insured and the value of the Title
           subject to the risk insured against by this policy; or
           (iv) if a government agency or instrumentality is the Insured Claimant, the amount it paid
           in the acquisition of the Title or the Insured Mortgage in satisfaction of its insurance
           contract or guaranty.
(b) If the Company pursues its rights under Section 3 or 5 and is unsuccessful in establishing
the Title or the lien of the Insured Mortgage, as insured,
           (i) the Amount of Insurance shall be increased by 10%, and
           (ii) the Insured Claimant shall have the right to have the loss or damage determined
           either as of the date the claim was made by the Insured Claimant or as of the date it is
           settled and paid.
(c) In the event the Insured has acquired the Title in the manner described in Section 2 of
these Conditions or has conveyed the Title, then the extent of liability of the Company shall
continue as set forth in Section 8(a) of these Conditions.
(d) In addition to the extent of liability under (a), (b) and (c), the Company will also pay those
costs, attorneys' fees and expenses incurred in accordance with Sections 5 and 7 of these
Conditions.

Form T-2                                   Sec. II                    Effective January 3, 2014
9. LIMITATION OF LIABILITY.
(a) If the Company establishes the Title, or removes the alleged defect, lien or encumbrance,
or cures the lack of a right of access to or from the Land, or establishes the lien of the Insured
Mortgage, all as insured, or takes action in accordance with Section 3 or 7, in a reasonably
diligent manner by any method, including litigation and the completion of any appeals, it shall
have fully performed its obligations with respect to that matter and shall not be liable for any
loss or damage caused to the Insured.
(b) In the event of any litigation, including litigation by the Company or with the Company's
consent, the Company shall have no liability for loss or damage until there has been a final
determination by a court of competent jurisdiction, and disposition of all appeals, adverse to
the Title or to the lien of the Insured Mortgage, as insured.
(c) The Company shall not be liable for loss or damage to the Insured for liability voluntarily
assumed by the Insured in settling any claim or suit without the prior written consent of the
Company.
10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF LIABILITY.
(a) All payments under this policy, except payments made for costs, attorneys’ fees and
expenses, shall reduce the Amount of Insurance by the amount of the payment. However, any
payments made prior to the acquisition of Title as provided in Section 2 of these Conditions
shall not reduce the Amount of Insurance afforded under this policy except to the extent that
the payments reduce the Indebtedness.
(b) The voluntary satisfaction or release of the Insured Mortgage shall terminate all liability of
the Company except as provided in Section 2 of these Conditions.
11. PAYMENT OF LOSS.
When liability and the extent of loss or damage have been definitely fixed in accordance with
these Conditions, the payment shall be made within 30 days.
12. RIGHTS OF RECOVERY UPON PAYMENT OR SETTLEMENT.
(a) The Company's Right to Recover.
Whenever the Company shall have settled and paid a claim under this policy, it shall be
subrogated and entitled to the rights of the Insured Claimant in the Title or Insured Mortgage
and all other rights and remedies in respect to the claim that the Insured Claimant has against
any person or property, to the extent of the amount of any loss, costs, attorneys' fees and
expenses paid by the Company. If requested by the Company, the Insured Claimant shall
execute documents to evidence the transfer to the Company of these rights and remedies. The
Insured Claimant shall permit the Company to sue, compromise or settle in the name of the
Insured Claimant and to use the name of the Insured Claimant in any transaction or litigation
involving these rights and remedies.
If a payment on account of a claim does not fully cover the loss of the Insured Claimant, the
Company shall defer the exercise of its right to recover until after the Insured Claimant shall
have recovered its loss.
(b) The Insured's Rights and Limitations.
           (i) The owner of the Indebtedness may release or substitute the personal liability of any
           debtor or guarantor, extend or otherwise modify the terms of payment, release a portion
           of the Title from the lien of the Insured Mortgage, or release any collateral security for

Form T-2                                   Sec. II                   Effective January 3, 2014
           the Indebtedness, if it does not affect the enforceability or priority of the lien of the
           Insured Mortgage.
           (ii) If the Insured exercises a right provided in (b)(i), but has Knowledge of any claim
           adverse to the Title or the lien of the Insured Mortgage insured against by this policy,
           the Company shall be required to pay only that part of any losses insured against by
           this policy that shall exceed the amount, if any, lost to the Company by reason of the
           impairment by the Insured Claimant of the Company's right of subrogation.
(c) The Company's Rights Against Non-insured Obligors.
The Company’s right of subrogation includes the Insured’s rights against non-insured obligors
including the rights of the Insured to indemnities, guaranties, other policies of insurance or
bonds, notwithstanding any terms or conditions contained in those instruments that address
subrogation rights. The Company's right of subrogation shall not be avoided by acquisition of
the Insured Mortgage by an obligor (except an obligor described in Section 1(e)(i)(F) of these
Conditions) who acquires the Insured Mortgage as a result of an indemnity, guarantee, other
policy of insurance, or bond and the obligor will not be an Insured under this policy.
13. ARBITRATION.
Either the Company or the Insured may demand that the claim or controversy shall be
submitted to arbitration pursuant to the Title Insurance Arbitration Rules of the American Land
Title Association (“Rules”). Except as provided in the Rules, there shall be no joinder or
consolidation with claims or controversies of other persons. Arbitrable matters may include, but
are not limited to, any controversy or claim between the Company and the Insured arising out
of or relating to this policy, any service in connection with its issuance or the breach of a policy
provision, or to any other controversy or claim arising out of the transaction giving rise to this
policy. All arbitrable matters when the Amount of Insurance is $2,000,000 or less shall be
arbitrated at the option of either the Company or the Insured, unless the Insured is an
individual person (as distinguished from an Entity). All arbitrable matters when the Amount of
Insurance is in excess of $2,000,000 shall be arbitrated only when agreed to by both the
Company and the Insured. Arbitration pursuant to this policy and under the Rules shall be
binding upon the parties. Judgment upon the award rendered by the Arbitrator(s) may be
entered in any court of competent jurisdiction.
14. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT.
(a) This policy together with all endorsements, if any, attached to it by the Company is the
entire policy and contract between the Insured and the Company. In interpreting any provision
of this policy, this policy shall be construed as a whole.
(b) Any claim of loss or damage that arises out of the status of the Title or lien of the Insured
Mortgage or by any action asserting such claim, shall be restricted to this policy.
(c) Any amendment of or endorsement to this policy must be in writing and authenticated by an
authorized person, or expressly incorporated by Schedule A of this policy.
(d) Each endorsement to this policy issued at any time is made a part of this policy and is
subject to all of its terms and provisions. Except as the endorsement expressly states, it does
not (i) modify any of the terms and provisions of the policy, (ii) modify any prior endorsement,
(iii) extend the Date of Policy or (iv) increase the Amount of Insurance. Each Commitment,
endorsement or other form, or provision in the Schedules to this policy that refers to a term
defined in Section 1 of the Conditions shall be deemed to refer to the term regardless of
whether the term is capitalized in the Commitment, endorsement or other form, or Schedule.

Form T-2                                   Sec. II                   Effective January 3, 2014
Each Commitment, endorsement or other form, or provision in the Schedules that refers to the
Conditions and Stipulations shall be deemed to refer to the Conditions of this policy.
15. SEVERABILITY.
In the event any provision of this policy, in whole or in part, is held invalid or unenforceable
under applicable law, the policy shall be deemed not to include that provision or such part held
to be invalid and all other provisions shall remain in full force and effect.
16. CHOICE OF LAW; FORUM.
(a) Choice of Law: The Insured acknowledges the Company has underwritten the risks
covered by this policy and determined the premium charged therefor in reliance upon the law
affecting interests in real property and applicable to the interpretation, rights, remedies or
enforcement of policies of title insurance of the jurisdiction where the Land is located.

Therefore, the court or an arbitrator shall apply the law of the jurisdiction where the Land is
located to determine the validity of claims against the Title or the lien of the Insured Mortgage
that are adverse to the Insured, and in interpreting and enforcing the terms of this policy. In
neither case shall the court or arbitrator apply its conflicts of laws principles to determine the
applicable law.

(b) Choice of Forum: Any litigation or other proceeding brought by the Insured against the
Company must be filed only in a state or federal court within the United States of America or its
territories having appropriate jurisdiction.
17. NOTICES, WHERE SENT. Any notice of claim and any other notice or statement in writing
required to be given the Company under this Policy must be given to the Company at [fill in].
NOTE: Bracketed [ ] material optional
(Form T-2: Loan Policy of Title Insurance)

Form T-2                               Sec. II                    Effective January 3, 2014
Appendix I
                                                Cause No. 2013-C1-14899
                                                          2013-CI-14899

 VANTAGE BANK TEXAS, SUCCESSOR                                            §                    IN THE DISTRICT COURT
 BY MERGER TO
            TO D'HANIS
                D'HANIS STATE BANK,                                       §
 and BANPROP, L. L. C.,                                                   §
                                                                          §
        Plaintiffs,                                                       §
                                                                          §                   l50TH JUDICIAL DISTRICT
                                                                                              150TH
 v.                                                                       §
                                                                          §
 STEWART TITLE GUARANTY COMPANY,                                          §
                                                                          §
        Defendant.                                                        §                           BEXAR COUNTY, TX

                           PLAINTIFFS' RESPONSE
                                       RESPONSE TO DEFENDANT'S
                         SECOND MOTION FORFOR SUMMARY JUDGMENT

TO THE HONORABLE JUDGE OF THE COURT:

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

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

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

                                   SUMMARY JUDGMENT EVIDENCE

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

second motion for summary judgment.

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

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

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

      Business Records Affidavit and
      Dangerous Structure Determination Board Demolition Order ................................... Tab D

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

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

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

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

                                                     BACKGROUND

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

 Stewart Title Guaranty
 Stewmi Title  Guaranty Company
                        Company("Stewart")
                                ("Stewart")totoD'Hanis
                                                D'HanisState
                                                        StateBank
                                                              Bank("D'Hanis").
                                                                   ("D'Hanis"). D'Hanis

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

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

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

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

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

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

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

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

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

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

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

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

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

I The judicial review
               review proceeding
                      proceeding was                 because the Property was sold. See City of
                                           dismissed because
                                 was later dismissed                                         ofSan
                                                                                                San Antonio
                                                                                                    Antonio p.
                                                                                                             v.
                Bank, No. 04-10-00181-CV,
D'Hanis State Bank,                         2010 WL
04-1O-00ISI-CV, 2010 WL 3249956,
                                                      3249956, *1
                                                                *1 (Tex.
                                                                   (Tex. App.—San   Antonio Aug.
                                                                         App.-San Antonio   Aug. 18,  2010, no
                                                                                                  IS, 2010,
pet.).
2 Stewart
   Stewart Title
            Title disingenuously     assertsthat
                  disingenuously asserts     thatthe
                                                  the Bank
                                                        Bank was
                                                              was aware,
                                                                    aware, before
                                                                            before itit made
                                                                                        made the
                                                                                               the Loan,
                                                                                                   Loan, that
                                                                                                           that the
                                                                                                                the City
                                                                                                                     City was
                                                                                                                           was
                              Improvements. See Stewart Second MSJ at 5-6. ItItbases
attempting to demolish the Improvements.                                                 basesthis
                                                                                               thisassertion
                                                                                                    assertion on
                                                                                                               on handwritten
                                                                                                                   handwritten
notations in
notations  in contracts
              contracts between
                         between the
                                   the buyer
                                       buyer and
                                             and seller
                                                  seller of the
                                                            the Property
                                                                 Property that
                                                                          that "Buyer
                                                                               "Buyer is is aware
                                                                                            aware of the
                                                                                                     the issue
                                                                                                         issue with
                                                                                                                with the
                                                                                                                      the city"
and "Buyer
     "Buyer has
              has satisfied
                  satisfied self that it can
                                         can attain
                                             attain all
                                                     all necessary
                                                         necessary permits
                                                                    pernlits from City of San Antonio
                                                                             from City            Antonio inin order to rehab
                                                                                                                         rehab
property." Id But Stewart Title is well well aware
                                             aware that
                                                     that the
                                                          the notations
                                                              notations concern the planned renovations to the Property,
                                                                                                                      Property,
not any attempt
         attempt to demolish
                     demolish the    Improvements. Rainey
                                the Improvements.      Rainey Bingham,
                                                                Bingham, the loan officer for the Bank,
                                                                                                     Bank, testified
                                                                                                             testified that the
                       referred to
"issue with the City" referred   to whether         the City would issue building permits to do the rehabilitation. Tab I
                                    whether or not the
at 32-34

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

Improvements. Id
              Id.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                             SUMMARY OF RESPONSE POINTS

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

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

Covered Risks 55 and
Covered Risks    and 6 for the
                           the following
                               following reasons:
                                         reasons: (1)
                                                   (1)the
                                                       theFebruary
                                                           FebruaryNotice
                                                                   Notice triggered
                                                                           triggered coverage
                                                                                     coverage

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

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

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

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

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

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

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

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

that date.
that date. The
            Thefact
                factthat
                     thatthe
                          theactual
                              actualdemolition
                                     demolition occurred
                                                 occurred after
                                                           after that
                                                                  that date
                                                                        date does
                                                                              does not
                                                                                    not retroactively
                                                                                         retroactively

exclude the loss.

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

       assel1ion that
on the assertion that itit affected
                           affected only
                                    only the
                                          the value
                                              valueof
                                                    of the
                                                        the property
                                                            propertyand
                                                                     andnot
                                                                         notits
                                                                             itstitle.  The cases
                                                                                 title. The cases on

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

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

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

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

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

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

City. But
City. Butthat
          thatlitigation
               litigationconcerned
                          concerned aa different
                                        different issue—whether
                                                   issue-whether the
                                                                 the City
                                                                     City complied
                                                                          complied with statutory
                                                                                        statutory

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

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

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

litigation with
litigation with the
                the City
                    City did
                         did not
                             not concern
                                 concern the
                                         the Februmy
                                             FebruaryNotice
                                                     Noticeatat all. The Bank
                                                                all. The Bank is
                                                                               is therefore
                                                                                   therefore not

taking inconsistent positions and judicial estoppel does not apply.

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

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

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

                                                 4
cause of action is not supported
                       supp011ed by evidence.

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

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

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

            RESPONSE TO TRADITIONAL SUMMARY JUDGMENT
                                            JUDGMENT MOTION

               STANDARD FOR TRADITIONAL SUMMARY JUDGMENT
               STANDARD FOR                     JUDGMENT

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

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

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

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

and
and every reasonable inference fi'om
          reasonable inference from the
                                     the evidence
                                         evidence will
                                                  will be
                                                       be indulged
                                                          indulged in his favor.
                                                                          favor. Nixon, 690
S.W.2d at 548-49; MontgOlnelY
                  Montgomery v.
                              v. Kennedy, 669 S.W.2d 309, 311
                                                          311 (Tex.
                                                              (Tex. 1984).
                                                                    1984). Further,
                                                                           FUllher, the non-

movant bears
       bears no burden unless and until the movant
                                            movant meets
                                                   meets its
                                                         its initial
                                                              initial burden. Rhone-Poulenc,
                                                                      burden. Rhone-Pollienc,

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

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

                              ARGUMENT AND
                                       AND AUTHORITIES
                                           AUTHORITIES

I.         February Notice
       The February Notice satisfied all of the filing
                                                filing requirements stated in Covered
                                                                              Covered Risks
       5 and 6.

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

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

       5.      The violation
               The    violation or
                                 01' enforcement
                                      enforcement of of anyany law,
                                                                law, ordinance,
                                                                       ordinance, permit,
                                                                                    pelmit, or
                                                                                            01'
               governmental    regulation (including
               govelmnentalregulation      (including those
                                                       those relating
                                                              relating to
                                                                       to building and zoning)
               restricting, regulating, prohibiting or
                                                    01' relating to:

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

                    (b)    the character,
                               character, dimensions or location of
                                                                 of any improvement erected on
                           the Land;. .....
                           the Land;   ...

                    if aa notice,
                          notice, describing   any part
                                   describing any   part of the
                                                             the Land,
                                                                 Land, isis recorded
                                                                             recorded in the
                                                                                          the Public
                                                                                              Public
                    Records setting
                    Records   setting f011h
                                      forth the
                                            the violation
                                                 violation or intention
                                                              intention to
                                                                         to enforce,      only to the
                                                                            enforce, but only
                            of the violation or enforcement refened
                    extent of                                 referred to in that notice.

            6.          enforcement action
                    An enforcement     action based
                                               based on      exercise of
                                                     on the exercise     of aa governmental
                                                                                governmental police
                                                                                              police
                    power not
                    power   not covered   by Covered
                                 covered by             Risk 55 if
                                              Covered Risk       if aa notice
                                                                        notice ofofthe
                                                                                    theenforcement
                                                                                        enforcement
                    action, describing
                            describing any part of the Land,
                                                        Land, is recorded in the Public Records,
                    but only to the extent of the enforcement refelTed
                                                               referred to in that notice.

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

            The plain language of Covered Risks 5 and 6 imposes only three requirements for notice:

the notice must (1) describe any part of the Land;
                                             Land; (2) be recorded in the Public Records;
                                                                                 Records; and (3)

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

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

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

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

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

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

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

         The purpose of
                      of this hearing is to determine
                                            detelmine whether the above property
                                                                              propet1y constitutes
         a public nuisance
                  nuisance in
                            in need
                               need of abatement.
                                        abatement. .. ..   Ifthe
                                                      . . If  the property
                                                                  property is
                                                                           is determined
                                                                               determined to be a
         public nuisance,
         public nuisance, the
                           the Board
                                Board may
                                        may order remediation
                                                   remediation actionaction up
                                                                            up to and
                                                                                    and including
                                                                                         including
         demolition of the structure
                           structure at the
                                        the owner's expense.

Id.

  Stewart
3 Stewart                           I(a) and 3(a) and (b), apparently
          Title quotes Exclusions 1(a)                      apparently as somehow
                                                                          somehow supporting an argument that notice
must be filed in real property records. See Stewart
                                             Stewart Second
                                                      SecondiVISJ
                                                               MSJ at 10-11.
                                                                       10-11. But
                                                                              Butneither
                                                                                  neither Exclusion
                                                                                          Exclusion 1(a)
                                                                                                       I (a) nor
                                                                                                             nor Exclusion
                                                                                                                 Exclusion
                                                mentions "Public Records." See Tab
3(a) contains any notice filing requirement or mentions                                        in (1)(a),
                                                                                  Tab A, at 221i~          3(a). Exclusion
                                                                                                  (I)(a), 3(a).  Exclusion
3(b) excludes coverage for certain defects, liens, encumbrances,
                                                   encumbrances, adverse claims or other matters "not recorded in the
Public Records at Date of
                        of Policy," but does not specify
                                                  specity that Public Records must be real property records. !d.  Id. at 2, 11
3(a)

                                                              6
          The
          The February Notice satisfies
              February Notice  satisfiesthe
                                         thefiling
                                             filingrequirements
                                                    requirementsofofCovered
                                                                     CoveredRisks
                                                                             Risks5 5and
                                                                                      and6.6. It

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

 enforcement (demolition)
 enforcement  (demolition)that
                           thatform
                                formthe  basisof
                                     thebasis  of the
                                                   the Bank's
                                                       Bank's claim,
                                                              claim, and was recorded
                                                                     and was recorded in
                                                                                      in the

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

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

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

 Second MSJ at 11.
               II. But
                    Butthere
                        thereisisno
                                  nolanguage
                                     language in
                                               in the
                                                   the Policy
                                                       Policy requiring
                                                               requiring that notice
                                                                              notice be sent "to the

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

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

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

satisfies each of
               of these requirements.

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

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

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

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

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

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

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

statute does
statute does not
             not apply
                 apply in
                       in this
                          this case.  This isisnot
                               case. This       notaadispute
                                                      disputeover
                                                              overwhether
                                                                   whether aagovernmental
                                                                              govemmental entity
                                                                                          entity

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

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

4 There is also no requirement   in the
                    requirement in  the Policy
                                        Policy that
                                               that the
                                                     the notice
                                                         notice be
                                                                be filed
                                                                    filed under
                                                                          underthe
                                                                                thegrantor's
                                                                                    grantor'sor
                                                                                              or grantee's
                                                                                                 grantee's name.
                                                                                                            name. Thus,
                                                                                                                   TIlliS,
Stewart  Title's assertion
Stewart Title's            that expert
                 assertion that         Rhonda Jolley
                                expert Rhonda    Jolley agrees
                                                         agrees that
                                                                 that the
                                                                       the February Notice could
                                                                           February Notice   could not
                                                                                                    not be
                                                                                                        be found
                                                                                                            found in the
grantor/grantee index for Bexar County Real Property Records is of   of no consequence. See Stewart Title
                                                                                                       Title Second
                                                                                                             Second M&I
                                                                                                                    MSJ
at 13.

                                                            7
 February Notice complied with the Policy language.

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

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

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

value and without
value     without Knowledge." Tab A at 33 ¶~ (1)(k).
                  Knowledge." Tab             (1 )(k). AAplain,
                                                          plain,grammatical
                                                                 gralllmatical reading
                                                                                reading of that
                                                                                           that

definition reveals
definition  revealsthat
                    that "established
                         "establishedunder
                                      understate
                                            statestatutes
                                                  statutes. .. . . for
                                                                   for the
                                                                        the purpose
                                                                             purpose of
                                                                                      ofimparting
                                                                                         imparting

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

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

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

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

notice must contain is prescribed,
                       prescribed, not
                                   not by statute,
                                          statute, but
                                                   but by
                                                       by Covered
                                                          Covered Risks
                                                                  Risks 55 and
                                                                           and 6. As established
                                                                               6. As established

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

notice must be filed and its mandatory
                             mandatOlY contents.

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

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

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

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

provides constructive notice to subsequent interest holders:

             filing of
        The filing  of the
                        the notice
                            notice is
                                    is binding
                                        binding on
                                                 on subsequent
                                                     subsequent grantees,
                                                                grantees, lienholders,
                                                                           lienholders, or other
                                                                                           other
        transferees of an interest in the property who acquire such interest after the filing
        transferees
        of the notice, and constitutes notice of the hearing on any subsequent recipient of
        any interest
        any  interest in  the property
                       in the property whowho acquires
                                                acquires such  interest after
                                                          such interest after the  filing of the
                                                                               the filing    the
        notice.

TEX. LOCAL
TEX. LOCALGOV'T  CODE§§2l4.001(e).
           GOV'TCODE    214.001(e).

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

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

                                                   8
states that the notice
                notice must
                       must contain
                            contain the
                                     the owner's
                                         owner's name
                                                 name "if
                                                      "if that
                                                          that information
                                                               information can
                                                                           can be
                                                                               bedetermined."
                                                                                  determined." So,

conversely, if the owner's name cannot be determined, it need not be included in the notice.

        The statute obviously contemplates that a document filed in the real propelty
                                                                             property records that

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

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

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

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

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

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

constructive
constmctive notice should be denied.

IL
II.        January Notice
       The January Notice satisfied all of the filing
                                               filing requirements
                                                      requirements stated in Covered Risks 5
       and 6.

       A.      Section 214.001(e)
                       214.001(e) of
                                   of the
                                       the Texas
                                           Texas Local
                                                 Local Government
                                                       Government Code governs
                                                                          governs the legality
               of a municipality's action, not coverage under
                                                        under the
                                                              the Policy.
                                                                  Policy.

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

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

describes paJi                      fOlih the violation or intention to enforce. See Tab A at 22 ~~
          part of the Land and sets forth                                                        ill

(5),
(5), (6).
     (6). Stewart
           StewmiTitle's
                  Title'sargument
                          argumentthat
                                   thatthe
                                        theJanuary
                                            January Notice
                                                    Notice was
                                                           was insufficient
                                                                insufficient to
                                                                              to trigger
                                                                                  trigger coverage
                                                                                          coverage

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

Public Records of     Property of
               ofReal Properly of Bexar County" rather than "Official Public Records of
                                                                                     of Bexar
                                                                                        Bexm

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

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

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

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

                                                 9
    located." TEX.
 is located."  TEX. LOCAL
                    LOCAL GOV'T
                          GOV'TCODE
                                CODE§ 214.001(e).
                                      § 214.001(e).But
                                                    Butsection
                                                        section214.001(e)
                                                                214.001(e)must
                                                                          must be
                                                                               be read
                                                                                  read in

 context.

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

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

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

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

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

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

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

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

chance to act, before the municipality takes final
                                             fInal action.

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

subsection (d). ItItprovides
subsection (d).      providesthat
                              thatthe
                                   themunicipality
                                       municipality may
                                                    may give
                                                         give mortgagees
                                                              m0l1gagees and
                                                                         and lienholders
                                                                              lienholders notice
                                                                                          notice

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

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

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

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

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

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

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

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

to act. ld.
        Id.

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

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

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

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

id. at §§ 214.001(e).
          214.001(e). But
                       Butfiling
                           filing the
                                   thenotice
                                       notice ininthe
                                                   theappropriate
                                                       appropriate records
                                                                    records affects
                                                                             affects only
                                                                                     only whether
                                                                                          whether the

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

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

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

do not appear in its text.

        B.          Policy language
                The Policy language isis considerably
                                          considerablybroader
                                                       broader than
                                                               than the statutory language.

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

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

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

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

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

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

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

the D'Hanis
    D 'Hanis opinion states that such notices "are routinely recorded" in the public notice records,

as opposed to the real property records. See D'Hanis, 2010 WL 3249956,
                                                      2010 WL 3249956, at
                                                                       at *3
                                                                          *3 n.2.
                                                                             n.2. Thus,
                                                                                  Thus, the

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

Section 214.001(e) is inapposite.

       C.      Neithet· Sal/chez
               Neither  Sanchez nor Noble Mortgage adds to the analysis.

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

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

                                                11
                                                II
 S.W.2d 762 (Tex.
 S.W.2d 762 (Tex. App.-El
                  App.—ElPaso
                          Paso 1997,
                                1997,pet.
                                      pet.denied).
                                           denied). But
                                                    But that case
                                                             case simply
                                                                  simply states
                                                                         states that
                                                                                that "an

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

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

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

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

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

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

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

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

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

compliance with
           with Rule
                Rule 656
                     656 of
                         of the
                            the Texas
                                Texas Rules
                                      Rules of
                                            of Civil
                                               Civil Procedure
                                                     Procedure isis aa 'recording'
                                                                        'recording' for the purpose

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

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

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

real property
real property records
              records ratller  than otller
                       rather tllall other public
                                           public records," Stewart Title
                                                  records." Stewart       Second MSJ at 12
                                                                    Title Second        12

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

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

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

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

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

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

this case.
tlllS

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

                                                 12
 coverage because the Policy requires that notice be filed in the Official Records of
                                                                                   of Real Propelty.
                                                                                           Property.

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

 III.    The Bank's loss is not excluded under the Policy.

         In addition to
                     to asselting
                        asserting that
                                  that the
                                       the Bank's loss is
                                                       is not
                                                          not covered,
                                                              covered, Stewart
                                                                       Stewart Title also asserts
                                                                                          asselis that

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

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

created subsequenttotoDate
created subsequent     DateofofPolicy
                                Policy....
                                       . . ." Tab A at 2, ¶~ 3(d).
                                            " Tab            3(d). Stewart
                                                                    Stewati Title
                                                                            Title asserts
                                                                                   asserts that
                                                                                           that the

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

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

misidentifies the cause
                  cause of the
                           the Bank's
                               Bank's loss.

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

patiiculat' notice
particular  notice or hearing. ItItwas
                   or hearing.      wasthe
                                         theviolation
                                             violationand
                                                       andenforcement
                                                           enforcement of
                                                                        ofmunicipal
                                                                           municipal ordinances
                                                                                      ordinances

concerning substandard
concerning substandardbuildings.
                       buildings. Despite
                                  Despite Stewati
                                          Stewart Title's propensity to
                                                  Title's propensity    read portions
                                                                     to read pOliions of the

Policy (and statutes and cases) in isolation, the Policy provisions must be read in context.

        Covered Risks 5 and 6 provide coverage for losses sustained by reason of
                                                                              of the violation or

enforcement of
enforcement    laws, ordinances,
            of laws, ordinances, or govemmental regulations
                                 or governmental regulationssuch
                                                             suchas
                                                                  as are
                                                                     are at issue
                                                                            issue here
                                                                                  here-the
                                                                                        the

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

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

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

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

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

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

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

its [sic] decrepit state").

                                                 13
        The Bank
        The Bank obtained
                 obtained a temporary   i~unction setting
                             temporary injunction setting aside the January
                                                          aside the  Januaty Notice
                                                                             Notice and
                                                                                    and

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

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

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

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

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

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

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

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

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

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

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

IV.
TV.     The           loss is
        The Bank's loss     is covered
                               covered under
                                        under Policy
                                               Policy provisions
                                                       provisions other      Covered Risk 2,
                                                                  other than Covered
        which is
              is the only
                     only type
                           type of risk
                                   risk addressed in the cases on which
                                                                  which Stewart Title relies.

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

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

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

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

Stewart Title insurance
              Insurance Co., 432 S.W.3d
                                 S. W.3d 535
                                         535 (Tex.
                                             (Tex. App.-Dallas
                                                   App.—Dallas 2014,
                                                               2014, pet.
                                                                     pet, filed).
                                                                           filed). The problem

at issue in Hanson was that the insured property was in a designated flood plain; the problem in

McGonagle was that a structure
                     stlUcture on
                               on the
                                   the property
                                       propeliy was
                                                was subject
                                                     subject to
                                                              to aa dedication   instrument. See
                                                                     dedication instrument.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

870.
870. The
      TheBank
          Bankwas
               wasaware
                   awarethat
                         thatthe
                              theproperty
                                  propertyrequired
                                           required renovation;
                                                     renovation; that was one
                                                                          one purpose
                                                                              pmpose of the

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

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

loss.
loss. That
      That isis aarisk
                   riskthat
                        thatisisexpressly
                                 expressly covered
                                           covered under the Policy
                                                   under the Policy as
                                                                    as Covered
                                                                       CoveredRisks
                                                                               Risks55and
                                                                                       and6.6. No

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

or McGonagle.
   McGonagle.

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

Insured by reason
Insured by reasonof:
                  of:...
                      . . [a]ny
                            [a]nydefect
                                  defectininororlien
                                                  lienororencumbrance
                                                           encumbrance on
                                                                       on the
                                                                          the Title." Tab   at 1, ~¶
                                                                                      Tab A at

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

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

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

           Hanson and McGonagle held only that the risks asselied
                                                         asserted in those cases did not fall within

    the specific coverage provision at issue, which covered only defects in, or liens or encumbrances

    on title (i.e., the equivalent of Covered
                                      Covered Risk
                                              Risk 22 in
                                                      in the
                                                         the Policy). The coverage
                                                             Policy). The coverage provision at issue in

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

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

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

           "Judicial estoppel
           "Judicial estoppel precludes
                              precludesaa pmiy  who successfully
                                          party who successfully maintains
                                                                 maintainsaa position
                                                                             position in one
                                                                                      in one

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

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

2009).

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

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

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

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

                  Afterreciting
Second MSJ at 16. After recitingcase
                                 case law
                                       lawconcerning
                                           concerning judicial
                                                      judicial estoppel,
                                                               estoppel, Stewart
                                                                         Stewmi Title concludes

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

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

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

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

5 Because
  Because the Bank does not seek seek coverage
                                       coverage under Covered Risk 2 ("[a]ny ("[alny defect in or lien
                                                                                                    lien or
                                                                                                         or encumbrance
                                                                                                            encumbrance on the
Title"), Stewart Title's assertion
                          assel1ion that
                                     that expert
                                          expert Rhonda
                                                   Rhonda Jolley agrees that the  the January
                                                                                       January Notice and February Notice
                                                                                                                      Notice do
not create a cloud on title is of no consequence. See Stewart Title Second Second MSJ
                                                                                    MSJ at 16.
6 Stewart Title appears to also invoke something it calls "estoppel in law." ,See     _SeeStewart
                                                                                           Stewart Title
                                                                                                    Title MSJ at 14.
                                                                                                                 14. The
                                                                                                                     The case
                                                                                                                         case it
cites, Long v.  Knox, 291
             v. Knox,  291 S.W.2d
                             S. W.2d 292
                                      292 (Tex.
                                           (Tex. 1956),      makes no
                                                   1956), makes      no mention
                                                                         mention of "estoppel
                                                                                      "estoppel in
                                                                                                 in law"
                                                                                                    law" and
                                                                                                          and the Bank has not
found
found any Texas
            Texas case
                  case employing
                        employing that    phrase. Because Long actually discusses judicial estoppel, the Bank concludes
                                     that phrase.
that Stewart Title's reference to "estoppel
                                   "estoppel in
                                              in law"
                                                  law" isis simply
                                                            simply aa reference
                                                                      reference to
                                                                                 to judicial estoppel under another name.

                                                              16
        Assuming Stewart
        Assuming Stewart Title
                         Title means
                               means that
                                      that the
                                           the Bank
                                               Bank cannot
                                                    cannot take                   the January
                                                           take the position that the January

Notice triggered coverage under the Policy because the Bank asserted in prior litigation that that

notice did not impart constructive
notice did                         notice, its
                      constructive notice,  its argument
                                                argument lacks
                                                          lacks merit.
                                                                merit. Once
                                                                       Once again,
                                                                            again, Stewart
                                                                                   Stewart Title

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

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

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

         nongovemmental entity.
Title, a nongovernmental

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

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

3249956, at *
3249956, at *1.
             I. The
                 TheBank
                     Bankargued
                          argued that
                                  thatthe
                                       thedemolition
                                           demolition order
                                                       order was
                                                             was not
                                                                  not enforceable
                                                                       enforceable against
                                                                                   against it

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

Id         TheCity
Id. at *2. The Cityargued
                    argued that
                            that the
                                  the Bank
                                      Bank was
                                           was not
                                               not protected
                                                   protected as
                                                             as aa bona
                                                                   bona fide
                                                                        fide lender
                                                                              lender because
                                                                                     because notice

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

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

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

(citing
(citingTEX.
        TEX. LOCAL GOv'T CODE§§214.001(e».
             LOCAL GOy'TCODE    214.001(e)).

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

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

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

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

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

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

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

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

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

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

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

on the Policy issue.

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

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

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

triggered by the February Notice.

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

asserting that the January
asselting that             Notice and the February
                   Janumy Notice          Februaty Notice
                                                   Notice complied
                                                          complied with the
                                                                        the requirements
                                                                             requirements of

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

          RESPONSE TO NO-EVIDENCE SUMMARY JUDGMENT
                                          JUDGMENT MOTION

               STANDARD FOR NO-EVIDENCE
               STANDARD FOR NO-EVIDENCE SUMMARY
                                        SUMMARY JUDGMENT.
                                                JUDGMENT.

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

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

deknse
defense on
        on which
           which the
                 the adverse party would
                     adverse party would have
                                         have the
                                               the burden
                                                   burdenof
                                                          ofproof
                                                             proofatattrial.
                                                                       trial. Tax.
                                                                              TEX. R.
                                                                                   R. Ctv.
                                                                                      CIY. P.

I 66a(i). But
166a(i).  Butsummary
              summary judgment
                       judgment isis not
                                     not appropriate
                                         appropriate ififthe
                                                          the non-movant
                                                              non-movant presents evidence showing

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

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

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

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

                                                18
                              ARGUMENT AND
                                       AND AUTHORITIES
                                           AUTHORITIES

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

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

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

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

CIV. P. I 66a(i). ItItdoes
     P, 166a(i),       doesnot,
                            not,however,
                                 however, authorize
                                           authorize "conclusory
                                                      "conclusory motions
                                                                  motions and
                                                                          and general
                                                                              general no evidence
                                                                                         evidence

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

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

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

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

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

        The motion at issue in Callaghan Ranch stated:

               The Killams
               The    Killams are
                                are entitled
                                     entitled to
                                               to summary
                                                   summary judgment
                                                              judgment because
                                                                        because the
                                                                                  the
               Plaintiffs    cannot by
               Plaintiffs cannot       by pleading,
                                             pleading, deposition,
                                                           deposition, answers
                                                                       answers to  to
               intel1'ogatories or
               interrogatories             admissible evidence
                                 or other admissible   evidence demonstrate
                                                                 demonstrate there
                                                                             there is
               any
               any evidence
                     evidence toto support
                                    suppOli the
                                              the declaratory
                                                   declaratory judgment
                                                                judgment seeking
                                                                         seeking toto
               declare the road in question a public thoroughfare.
                                                       thoroughfm·e.

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

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

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

Title's
Title's motion
        motion suffers
               suffers the same defect.

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

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

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

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

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

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

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

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

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

See id.

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

abbreviated  versionof
abbreviated version  of its
                         its traditional
                             traditionalmotion.
                                         motion. Because
                                                 Because itit is "not
                                                                  "not specific
                                                                        specific in
                                                                                  in challenging
                                                                                      challenging a

particular
pmiicular element [and]
                  [and] is conclusory,    motion is legally insufficient
                           conclusmy, the motion            insufficient as a matter of law" and

should be denied. See Callaghan Ranch, 53 S.W.3d at 3.

II.       In the alternative, the evidence raises a genuine issue of material fact.

          The only element of the Bank's
                                  Bank's claim
                                         claim for
                                               for breach
                                                   breach of
                                                          of contract
                                                             contract even arguably
                                                                           arguably challenged in

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

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

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

predicate to coverage. Stewart Title
                               Title MSJ at 15.

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

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

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

the Public Records
           Records setting
                   setting fmih
                            forththe
                                  theviolation
                                      violationororintention
                                                    intentiontotoenforce
                                                                  enforce....              2, ~~
                                                                          . . ."" Tab A at 2,    (5), (6).
                                                                                              71(5),

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

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

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

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

Tab G. The Bank made a claim on the Policy, and Stewart
                                                Stewm'l Title denied the claim. Tab F.

                                                   20
          The
          The Bank
              Bank has
                   has produced
                        produced evidence raising aa genuine
                                 evidence raising            issue of material
                                                     genuine issue    material fact
                                                                               fact and
                                                                                     and

 demonstrating  its entitlement
 demonstrating its  entitlementtototrial
                                    trialon
                                          onthe
                                             the issue
                                                  issue of
                                                        of Stewa11
                                                           StewartTitle's
                                                                   Title's breach
                                                                           breach of
                                                                                  of contract.
                                                                                     contract. Stewart
                                                                                               Stewart

Title's motion
        motion for
               for no-evidence summary judgment should be denied.

                          OBJECTIONS TO STEWART
                                        STEWART TITLE'S
                                                TITLE'S
                      PROFFERED SUMMARY JUDGMENT EVIDENCE

          The Bank objects to Exhibit 2, which is purportedly an article
                                                                 at1icle from mysa.com, because it

                                                                  TEX. R.
is irrelevant to any summary judgment grounds and is hearsay. See TEX. R. EVID.
                                                                          EV1D,402,
                                                                                402, 802.
                                                                                     802.

          The Bank
          The Bank objects to Exhibit
                   objects to         17, which
                              Exhibit 17, which is
                                                is Stewart Title's Notice
                                                   Stewat1 Title's Notice of Intent
                                                                             Intent to Use
                                                                                       Use

Discovery Products
          Products Not on File with the Court for Summary Judgment Purposes (the "Notice").

                                                                                          TEX. R.
The movant must file and serve all evidence at least twenty-one days before the hearing. TEX.

Cw.
ClY. P. 166a(d).
        166a(d). The
                  TheNotice
                      Noticereferences
                             references "deemed
                                         "deemed Responses
                                                 Responses to
                                                            to Requests
                                                               Requests for
                                                                        for Admission,
                                                                            Admission, Non-

Responses to Requests
Responses to Requests for
                       for Production,
                            Production, Requests
                                         Requests for
                                                   forDisclosure,
                                                       Disclosure, Interrogatory
                                                                    Interrogatory answers,
                                                                                   answers,

appendices, references and
appendices, references and otlier
                           other discovery,"
                                  discovery," but
                                              but Stewat1
                                                  Stewart Title
                                                          Title has
                                                                has failed
                                                                    failed to attached
                                                                              attached any such

items to its summary judgment motion or otherwise file and serve any such items at least twenty-

one days before the hearing.
                    hearing. Accordingly,
                             Accordingly, the
                                           the Notice
                                               Notice provides insufficient
                                                               insufficient notice of
                                                                                   of any intent to

use the foregoing items. To
        foregoing items. To the
                             the extent
                                 extent Stewart
                                        Stewat1 Title
                                                Title attempts
                                                      attempts to use any "evidence" that it failed

to
to file and serve at least twenty-one
                           twenty-one days before the hearing, the Bank objects to such evidence
                                                                                        evidence

on the grounds that itit is
                          is offered
                             offered in
                                      in violation
                                         violation of
                                                   ofTEX.  R. ClY.
                                                      TEX. R. Cw. P.
                                                                   P. 166a(d).

          Accordingly, Stewart's Exhibits 2 and
          Accordingly, Stewat1's            and 17
                                                17 should
                                                   should be
                                                          be stricken
                                                             stricken from
                                                                      fi·om the summary judgment

record.

                                  CONCLUSION AND PRAYER

          Stewart
          Stewa11 Title does not conclusively prove its entitlement to summary judgment
                                                                               judgment on atly
                                                                                           any of

the grounds asserted
            asserted in its motion for traditional summary
                                                   summary judgment.
                                                            judgment. Its motion for no-evidence

                                                    21
summary  judgment isis fatally
summary judgment       fatally defective.
                               defective. In
                                          In addition,
                                              addition, the
                                                         the no-evidence
                                                             no-evidence motion fails
                                                                                fails because
                                                                                      because the

Bank has
Bank has not only
             only produced
                  produced evidence
                           evidence supporting
                                    suppOliing its       of coverage,
                                               its claim of coverage, but
                                                                      but has
                                                                          has conclusively
                                                                               conclusively

established coverage under the Policy.

        WHEREFORE,
        WHEREFORE,Vantage
                   VantageBank
                           BankTexas,
                                Texas,successor
                                       successorby
                                                 bymerger
                                                   merger to
                                                           to D'Hanis State Bank,
                                                              D'Hanis State Bank,

individually and
             and as agent for Banprop, L.L.C., respectfully requests
                                                            requests that the Court
                                                                              COUli deny Stewart

Title Guaranty
      Guaranty Company's motion for summary judgment
                                             judgment in
                                                      in its
                                                          its entirety.
                                                              entirety. The Bank also requests

such further relief to which it is entitled.

                                                Respectfully submitted,

                                                 Cox SMITH MATTHEWS
                                                 COX         MATTHEWS INCORPORATED
                                                                         INCORPORATED
                                                 David B. West
                                                 State Bar No. 21196400
                                                 dbwest@coxsmith.com
                                                 Ellen B. Mitchell
                                                 State Bar No. 14208875
                                                 emitchell@coxsmith.com
                                                 David A. Vanderhider
                                               . State Bar No. 24070787
                                                 dvanderhider@eoxsmith.com
                                                 dvanderhider@coxsmith.com
                                                 112 East Pecan Street, Suite 1800
                                                 San Antonio, Texas 78205
                                                 Telephone:  (210) 554-5500
                                                 Telephone: (210)  554-5500
                                                 Facsimile: (210)
                                                Facsimile:  (210) 226-8395

                                                    lsi
                                                    Is/ David B. West
                                                    David B. West

                                               Attorneys for Vantage
                                               Attorneysfor  Vantage Bank Texas,
                                                                           Texas, successor by
                                               merger to D'Hanis
                                                         D Wards State
                                                                  State Bank,
                                                                        Bank, Individually
                                                                              Individually and
                                                        for Banprop, L.L. C.
                                               as Agent for

                                               22
                                    CERTIFICATE OF SERVICE

            I hereby
              hereby certify
                     celiify that
                             that a true
                                     true and
                                           and correct
                                                COlTect copy
                                                         copy of
                                                               ofPlaintiffs'
                                                                  Plaintiffs' Response
                                                                               Response to
                                                                                         to Defendant's
                                                                                            Defendant's

 Second Motion for
 Second Motion for Summary Judgment has
                   Summary Judgment has been
                                        been served
                                             served on
                                                    on counsel
                                                       counsel of record
                                                                  record via e-mail and

 facsimile on this 30th day of December, 2014, as follows:
                                                  follows:

            Scott Breitenwischer
            Andrew Nash
            Royston, Rayzor, Vickery & & Williams, L.L.P.
            Pennzoil Place
            711
            711 Louisiana Street, Suite 500
            Houston, Texas 77002-8380
            (713) 224-8380
                  224-8380—   Telephone
                           - Telephone
            (713) 225-9945
                  225-9945 —  Facsimile
                           - Facsimile

                                                               B. West
                                                     /s/ David B.
                                                     David B. West

5730513.2                                          23
Appendix J
FILED
2/4/2015 4:27:25 PM
Donna Kay McKinney
Bexar County District Clerk
Accepted By: Lisa Morales

                                                        Cause No. 2013-CI-14899

                 VANTAGE BANK TEXAS, SUCCESSOR                                           IN THE DISTRICT COURT
                 BY MERGER TO D'HANIS STATE BANK,
                 and BANPROP, L. L. C.,

                            Plaintiffs,

                 v.                                                                      150th JUDICIAL DISTRICT

                 STEWART TITLE GUARANTY
                 COMPANY,

                            Defendants.                                                  BEXAR COUNTY, TEXAS

                                     PLAINTIFFS' THIRD AMENDED ORIGINAL PETITION
                                             AND REQUEST FOR DISCLOSURE

                            PLAINTIFFS, VANTAGE BANK TEXAS, successor by merger to D'HANIS STATE

                 BANK ("Bank"), and BANPROP, L. L. C, file this Third Amended Original Petition against

                 STEWART TITLE GUARANTY COMPANY ("Stewart Title"), and in support thereof would

                 show the court as follows:

                                               I. DISCOVERY CONTROL PLAN

                            1.     Plaintiffs intend that discovery be conducted under Level 3, pursuant to rule 190.4

                of the Texas Rules of Civil Procedure.

                                                           IL PARTIES

                         2.        Plaintiff Vantage Bank Texas, successor by merger to D'Hanis State Bank, is a

                financial institution created under the laws of the State of Texas, with its principal place of

                business in San Antonio, Texas. Pursuant to Chapter 10.008(a)(2) of the Texas Business

                Organizations Code, Vantage Bank Texas is vested with all rights, title and interests to the

                property owned by D'Hanis State-Bank, including all rights, interests and claims in this law suit.

                5730297.3
            3.    Plaintiff Banprop, L. L. C. is a limited liability corporation incorporated under the

 laws of the State of Texas, with its principal place of business in McAllen, Texas.

            4.   Defendant Stewart Title Guaranty Company is a corporation licensed to do

 business in Texas. It has entered an appearance in this case.

                               III. JURISDICTION AND VENUE

            5.   The Court has subject matter jurisdiction over this suit. The damages sought are

 within the jurisdictional limits of this Court.

            6.   The Court has personal jurisdiction over the defendant because it resides or does

 business in the State of Texas and this lawsuit arises out of acts, omissions or business it

conducted in the State of Texas.

            7.   Venue is proper pursuant to section 15.002 of the Texas Civil Practice and

Remedies Code because a substantial part of the events or omissions giving rise to the claims set

forth herein occurred in Bexar County, Texas.

                                IV. FACTUAL BACKGROUND

A.      The Bank makes a loan and obtains a title policy from Stewart Title.

        8.       This is a suit on a title policy. In September• 2009, Stewart Title issued a

mortgagee title policy, policy number M-5952-000007292 (the "Policy"), to the Bank in the

amount of $900,000. The subject property is located at 119 Jackson Keller Road and is

described in the Policy as Lot 7, Block, 13, New City Block 10060, East Shearer Hills Addition,

situated in the City of San Antonio, Bexar County, Texas, according to plat thereof recorded in

Volume 4500, Page 229, Deed and Plat Records of Bexar County, Texas (the "Property"),

        9.       Prior to issuing the Policy, Stewart Title obtained a title run from one of its

agents, Service Title. That title run was made from a title plant leased from Title Plant Services

                                                   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-CI-
                             09703, seeking restoration and/or demolition of the Property.

                  02/11/08 A notice stating the Improvements on the Property were the subject of a
                             hearing on possible demolition ("February Notice").

         16.         Other notices pertaining to the possible demolition of the Improvements to the

Property were filed in the Official Public Records of Bexar County, including:

  The title commitment did not include any reference to notices of hearings on the possible demolition of the
Improvements, the issuance of a demolition order, or the fact that a lawsuit was pending between the property owner
and the City over the issuance of a demolition order. All of this information was available in the Official Public
Records of Bexar County.

                                                        4

5730297.3
                  01/14/08    A notice stating the Improvements on the Property were the subject of a
                              hearing on possible demolition ("January Notice").

                  02/13/08    A lawsuit between Cantu and the City appealing the demolition order,
                              Cause No. 2008 CI-02297, Bexar County, Texas.           That case was
                              pending and set for trial before the Policy was issued.

            17.      At the time the Policy was issued, the City had issued an order to demolish the

    Improvements to the Property which were the subject of the Bank's loan. Cantu's lawsuit

    against the City concerning that demolition order was also pending at the time the Policy was

    issued. Before judicial review of the demolition order was completed, however, the Property

    was sold to Eden Roc.2

            18.     In January of 2008, the City of San Antonio issued notice of a hearing concerning

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

Notice was filed and recorded in the Official Public Records of Bexar County, Texas. In

February of 2008, the City issued a second notice of a hearing to demolish the Improvements

("February Notice"). The February Notice was• filed in the Real Property Records of Bexar

County with the correct legal description, but the wrong owner's name. This information was in

the title search made by Service Title, but was not noted on Schedule C of the title commitment

issued to the Bank.

          19.       Although the Dangerous Structure Determination Board had found the property to

be a public nuisance and issued a demolition order, a different office of the City had issued

building permits for the rehabilitation of the Property. Relying on the issuance of those permits,

the Bank closed on the loan and advanced $380,212.60 for the purchase of the Property,

2
  The judicial review proceeding was later dismissed because the Property was sold. See City of San Antonio v.
D'Hanis State Bank, No. 04-10-00181-CV, 2010 WL 3249956, *1 (Tex. App. San Antonio Aug. 18, 2010, no
pet.).
                                                      5
5730297.3
including the Improvements. The Bank then advanced approximately $136,632.69 for

rehabilitating the Improvements, for a total of $516,845.29. At a later inspection, a Bank officer

found a "Stop Work Notice" posted on the Property. Then, in November 2009, the Bank learned

that the building permits had been revoked and the Property was the subject of a demolition

order resulting from the January Notice.

C.          Stewart Title uses litigation against City as basis to deny coverage.

        20.        The Bank notified Stewart Title of the City's enforcement action. As obligated

under the Policy, Stewart Title assumed coverage under the Policy and retained Richard Butler to

represent the Bank and file a law suit against the City.

        21.        Susan Withers, claims counsel for Stewart Title, was involved in the strategy for

the law suit. She solicited affidavits for use in pleadings and became involved in the strategy for

the law suit. On January 28, 2010, Withers acknowledged in an e-mail to Butler that "a Notice

of Hearing (for a hearing on January 14, 2008) was filed of record, and not excepted on our

policy."

        22.        On February 1, 2010, Withers was informed by Service Title that the January

Notice "was filed in the Public Notices Record's NOT in the Official Public Records or property

records." Upon receiving this information, Withers responded, "Please DO NOT LET THEM

CHANGE THIS. IT NEEDS TO STAY AS IS."

        23.        Withers then forwarded her instruction ("DO NOT LET THEM CHANGE

THIS") to Butler and marked the e-mail_ "high" importance. Butler responded that Stewart Title

had received two notices of hearing concerning the Property: (1) the January Notice, which was

filed in the Official Public Records of Bexar County, and .(2) the February Notice, which was

                                                   6

5730297.3
filed in the Official Public- Records of Real Property of Bexar County. The February Notice was

in Stewart Title's file.

            24.   Withers then contacted Nancy Staton, an employee of Propertylnfo Corp. (a

wholly-owned subsidiary of Stewart Title) and requested an affidavit on how the January Notice

was recorded and indexed. Staton testified that: (1) the January Notice was not in Propertylnfo

Corp.'s database, and (2) if the January Notice had been filed in the Official Public Records of

Real Property of Bexar County, it would be in Propertylnfo Corp.'s database.

        25.       On February 4, 2010, Butler filed suit against the City (D 'Hanis State Bank v.

City of San Antonio, Cause No. 2010-CI-01778, in the 73rd Judicial District Court of Bexar

County, Texas) seeking to enjoin demolition of the Improvements and a declaration that the

Bank was not bound by the January Notice because it was an innocent lender without actual or

constructive notice.

        26.       The trial court denied the City's plea to the jurisdiction and granted a temporary

injunction enjoining demolition of the Improvements. The City filed an interlocutory appeal

challenging both rulings.

D.      Stewart Title abandons the Bank,

        27.       Butler recognized, and informed the Bank, that setting aside one notice of

demolition would not prevent the City from issuing future notices and ultimately demolishing the

Improvements. Despite the City's appeal, and the likelihood that the City would continue its

enforcement efforts regardless of the outcome of that appeal, Stewart Title declared that it had

fulfilled its responsibility under the Policy.

        28.       Withers informed the Bank that Stewart Title's basis for withdrawing coverage

was that "any claim concerning this proposed demolition of the structures located on the

                                                  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
     xi                                                          r (77
                                                                   P. 0. BOX 839966
                                                                                         (4))

                                                                   SAN ANTONIO TEXAS 78283-3966

DATE: October 13, 2011

D'HANIS STATE BANK
1401 19TH ST
HONDO TEXAS 78861

RE: PROPERTY AT: 119 JACKSON KELLER

                                    NOTICE OF HEARING
You are hereby notified that the Dangerous Structure Determination Board has rescheduled the above
property for another public hearing on October 24, 2011 at 8:30 a.m. in the City Council Chambers of
the Municipal Plaza Building located at 114 W. Commerce Street.
This date shall supersede any other conflicting hearing dates contained in prior notices or orders from
the Board. The Board shall hear all issues and follow procedures noticed in its prior orders regarding
the above property. All warnings, reports, or directions contained or incorporated in prior notices or
orders remain valid and applicable.

For more information, please contact the Dangerous Premise Unit at (210) 207-3324.

                                                            Sincerely yours,

THE MUNICIPAL PLAZA BUILDING IS WHEELCHAIR
ACCESSIBLE. ACCESSIBLE PARKING SPACES ARE                   MARC A. CASTRO
AVAILABLE UPON REQUEST. INTERPRETERS FOR THE                Assistant Director
DEAF MUST BE REQUESTED AT LEAST 24 HOURS PRIOR              Development Services Department
TO THE MEETING BY CALLING 207-7245-TDD.                     Code Enforcement Services Division

Legal Review on W. 13'1(       by
                                                                   Eric G. Burns
                                                               Assistant City Attorney

                                                                                  XHIr1i
                                                                                  I ?
                                                                                                  AAnal

                                                                       DHSB-Banprop - 000782