Texas Dep't of Insurance v. Reconveyance Services, Inc.

Reconveyance Services, Inc., sued the Texas Department of Insurance for a declaration that charging additional fees for the services Reconveyance wished to provide in Texas is not prohibited by the Texas Insurance Code. Because we conclude that Reconveyance has pleaded an ultra vires action, in light of our decision in City of El Paso v. Heinrich, 284 S.W.3d 366 (Tex. 2009), we reverse the court of appeals’ judgment and render judgment dismissing Reconveyance’s suit for lack of subject-matter jurisdiction.

According to its pleadings before the courts below,*fn1 Reconveyance is a Washington state corporation that provides what it describes as “post-closing mortgage release services” in several states other than Texas. When a buyer purchases a residential property, the lender’s lien on the property often is not released by the seller’s lender until some time after closing, securing the lender in the event the transaction does not close. Sometimes lenders neglect to file a release of the original seller’s mortgage, and that pre-existing lien could interfere with the buyer’s later attempts to sell the home or refinance. For a fee, Reconveyance would undertake to obtain a release of that prior existing mortgage at the time the buyer initially purchases the home to ensure subsequent marketability of the buyer’s title. To market its services to the widest number of Texas consumers, Reconveyance desired to have its services listed by Texas title agents as an optional, paid service available to buyers. Prior to doing so, however, a Reconveyance employee initiated communications with Department employees to determine how the Department would classify Reconveyance’s proposed business model.

By way of the Texas Title Insurance Act, the Texas title insurance industry is to be “completely regulate[d]” by the Department. TEX. INS. CODE § 2501.002. By law, the Texas Commissioner of Insurance caps the premiums charged by title agents for three categories of services: title insurance, title examinations, and “ closing the transaction.” See id. § 2501.003(8) (defining premium); id. § 2501.006 (defining “closing the transaction”); id. § 2703.151 (directing the commissioner to fix and promulgate premium rates). A Department employee’s response to Reconveyance’s inquiry noted that he understood prior lien release services such as those proposed by Reconveyance to be among the costs to be borne by title agents.*fn2 The Department employee’s response noted that the Department had initiated disciplinary action against at least one title agent for charging a fee for services similar to Reconveyance’s. Title agents refused to list Reconveyance’s service as an optional service to home buyers without Department approval, limiting Reconveyance’s potential customer base.