[00:00:17] Speaker 00:
Is Mr. Holstead?

[00:00:32] Speaker 00:
Please come forward.

[00:00:45] Speaker 00:
Okay, this is case number 16-2158, Northwest Title Agency incorporated against the United States.

[00:00:54] Speaker 00:
When you're ready, Mr. Holstead.

[00:00:59] Speaker 04:
Thank you, Your Honor.

[00:01:01] Speaker 04:
Wayne Holstead for Northwest Title Agency.

[00:01:04] Speaker 04:
May it please the Court?

[00:01:06] Speaker 04:
I would like to try to focus the argument by highlighting two comments made at page 9 of the Appellee's Brief.

[00:01:14] Speaker 04:
as they characterize the argument.

[00:01:17] Speaker 04:
The first, this is characterized as a contract with HUD and Northwest Title to provide closing services to home buyers purchasing homes from HUD.

[00:01:26] Speaker 04:
The second is that the issue is that we were not to be allowed to charge fees for a second time.

[00:01:34] Speaker 04:
The first comment is simply not true.

[00:01:39] Speaker 04:
We were not contracting with HUD to provide services for home buyers.

[00:01:43] Speaker 04:
We contracted with HUD to provide services for HUD.

[00:01:47] Speaker 04:
HUD was the seller of property.

[00:01:49] Speaker 04:
Sales and purchases are two identifiable parts of the transaction.

[00:01:54] Speaker 04:
There is nothing in the solicitation.

[00:01:56] Speaker 04:
There is nothing in the original contract.

[00:01:59] Speaker 04:
There is nothing in the course of conduct.

[00:02:04] Speaker 04:
Northwest Title closed 10,000 transactions over a period of two years with HUD.

[00:02:10] Speaker 04:
They were allowed to charge some fees to buyers in 10,000 transactions.

[00:02:16] Speaker 01:
What kind of fees?

[00:02:18] Speaker 04:
Excuse me?

[00:02:18] Speaker 01:
What kind of fees was Northwest Title allowed to charge?

[00:02:22] Speaker 01:
I gather in what, two of the three or maybe all three places, Title Insurance, you did charge.

[00:02:30] Speaker 04:
Yes, that's a good start at breaking down.

[00:02:32] Speaker 03:
The government doesn't contend that you couldn't charge for title insurance, right?

[00:02:36] Speaker 04:
They never did.

[00:02:36] Speaker 03:
The contract's clear that you could charge for title insurance.

[00:02:41] Speaker 04:
The contention has been that we couldn't charge buyers any fees.

[00:02:45] Speaker 04:
I don't think the government's ever contended you couldn't charge for title insurance, right?

[00:02:49] Speaker 04:
Well, they always allowed us to.

[00:02:50] Speaker 03:
They don't now contend that you couldn't charge for title insurance.

[00:02:54] Speaker 04:
Yes.

[00:02:55] Speaker 04:
So we did charge

[00:02:58] Speaker 04:
We were allowed to contract directly with purchasers and charge them some fees.

[00:03:03] Speaker 01:
Was any part of your $4 million request a request for damages for inability to sell title insurance to buyers?

[00:03:16] Speaker 04:
No, it is not.

[00:03:19] Speaker 03:
What about the title search?

[00:03:21] Speaker 04:
That is, to me, the most critical issue.

[00:03:26] Speaker 04:
because the contracts were interpreted differently.

[00:03:29] Speaker 04:
Minnesota and Wisconsin, we were allowed to charge for title searches.

[00:03:34] Speaker 04:
Title searches and exams are a necessary component of preparing title insurance.

[00:03:39] Speaker 03:
There's some suggestion that you can have two different kinds of title search.

[00:03:43] Speaker 03:
One, if you're going to get insurance, and that's a more thorough one, and a less thorough one if you're not getting the insurance, right?

[00:03:51] Speaker 03:
Exactly.

[00:03:54] Speaker 03:
What were you not allowed to charge for?

[00:03:56] Speaker 03:
The more thorough search?

[00:03:58] Speaker 03:
In Missouri.

[00:03:59] Speaker 04:
The more thorough search?

[00:04:01] Speaker 04:
In Missouri, we were not allowed to charge for the more thorough search, which is a significant portion of our damages.

[00:04:08] Speaker 04:
And it gives a distinction between the three contracts.

[00:04:11] Speaker 04:
They were interpreted differently by I. We were allowed to charge the more thorough search in Wisconsin and Minnesota.

[00:04:19] Speaker 03:
But the problem that you have, it seems to me,

[00:04:22] Speaker 03:
is that I don't see your complaint as raising this as a separate issue.

[00:04:27] Speaker 03:
And I don't see that the summary judgment papers raise this as a separate issue.

[00:04:32] Speaker 03:
That is the recovery for the more thorough title search.

[00:04:40] Speaker 04:
I would suggest that it at least appeared in my affidavit the distinctions between the two contracts.

[00:04:47] Speaker 04:
I think the complaint could have been clear

[00:04:50] Speaker 03:
Was it raised in connection with the summary judgment motion?

[00:04:55] Speaker 04:
I believe it was, but I can't say that for sure.

[00:05:01] Speaker 04:
I didn't make the summary judgment motion.

[00:05:10] Speaker 04:
The second part of the distinction I raised in the beginning, the concern that was always raised from the beginning of the contract

[00:05:20] Speaker 04:
was that we not be able to charge duplication of services, which is, I think, what the Court is highlighting there, where the search is different.

[00:05:30] Speaker 04:
But there's also a distinction between services charged for a closer, for a seller as opposed to the buyer.

[00:05:38] Speaker 04:
There's much more additional work that goes into charging for closing for buyers.

[00:05:44] Speaker 04:
Our understanding of the nature or basis for the dispute

[00:05:47] Speaker 04:
and this is why I briefed it so extensively, there's a regional difference.

[00:05:52] Speaker 04:
In the West Coast, and we did business in California and Arizona, there is one closer that handles both sides of the transaction.

[00:06:02] Speaker 04:
The Midwest is clearly different than that.

[00:06:04] Speaker 04:
Two closers performing two separate functions are involved.

[00:06:09] Speaker 04:
That has always been my understanding of the nature of the dispute with HUD,

[00:06:13] Speaker 04:
originating in the Minnesota and Wisconsin contracts as to why we cannot charge the additional closing fees, which are required when putting together the lender's documents.

[00:06:25] Speaker 04:
I also point out California and Arizona closers charge about three times more than in the Midwest because there is so much more work.

[00:06:33] Speaker 04:
In our initial dealings with HUD, we were dealing with their California office.

[00:06:38] Speaker 04:
So that's always been my understanding of the nature of the dispute.

[00:06:45] Speaker 04:
I would like to comment just briefly on the Jowlett case, which the judge raised.

[00:06:55] Speaker 04:
There is one difference, I think, that was overlooked.

[00:06:57] Speaker 04:
I think the judge looked far too much at industry practice when the totality of circumstances needs to be considered.

[00:07:09] Speaker 04:
We aren't using industry practices to create an ambiguity here.

[00:07:13] Speaker 04:
I'm attempting to use industry practices to resolve the ambiguity.

[00:07:19] Speaker 04:
There's plenty of, in my reply brief, I went into some detail going back to Corbin and Willis and the restatement, the importance of going beyond the literal reading of the contract, looking at exactly what the parties did and what they were discussing.

[00:07:42] Speaker 04:
The last point I want to highlight, I raised the respite issue.

[00:07:51] Speaker 04:
In the 1990s, I actually worked fairly closely with HUD on respite enforcement issues in the state of Minnesota.

[00:07:59] Speaker 04:
HUD was investigating certain practices in Minnesota.

[00:08:04] Speaker 04:
I was doing the same as a private attorney.

[00:08:07] Speaker 04:
I brought two antitrust suits in Minnesota, representing Northwest title, complaining of RESPA violations.

[00:08:16] Speaker 04:
I lost both cases.

[00:08:18] Speaker 04:
But HUD went in with their enforcement actions and they won their cases.

[00:08:24] Speaker 04:
I can guarantee you that there's nobody in the state of Minnesota who the real estate industry would love to find in violation of a RESPA violation than me.

[00:08:35] Speaker 04:
And they would love to do that, especially in connection with the contract with HUD.

[00:08:40] Speaker 04:
We were always very, very concerned about violating RESPA.

[00:08:44] Speaker 04:
And the contention that we were supposed to be providing all these pre-services to buyers raises a serious RESPA issue to me.

[00:08:58] Speaker 04:
Whether or not we would lose, whether or not HUD would lose really isn't the issue.

[00:09:03] Speaker 04:
The issue is we could have been sued and there could have been significant liability.

[00:09:07] Speaker 04:
So that's why I raised that issue.

[00:09:10] Speaker 04:
If there's no questions, I can save my time for rebuttal.

[00:09:17] Speaker 00:
Any more questions from this?

[00:09:20] Speaker 00:
Thank you.

[00:09:20] Speaker 00:
We'll save you some rebuttal time.

[00:09:23] Speaker 00:
Ms.

[00:09:23] Speaker 00:
Chandler?

[00:09:24] Speaker 00:
Thank you, Your Honor.

[00:09:26] Speaker 03:
Let me say what the problem that I see here is that the government agrees that they could charge for title insurance, right?

[00:09:33] Speaker 03:
question about that, and they were allowed to charge for title insurance.

[00:09:36] Speaker 03:
But what I understand them to be arguing is that in order to write title insurance, we had to do a more thorough and costly title search, and that we should have been allowed to charge for that, but in at least one of these states, we were not allowed to charge for that.

[00:09:52] Speaker 03:
And if we can charge for the title insurance, why shouldn't we be allowed to charge for the extra title search that's necessary for the title insurance?

[00:10:01] Speaker 03:
That seems to me

[00:10:03] Speaker 03:
to be the argument whether it was raised below, that's another question.

[00:10:06] Speaker 03:
What's your response to that?

[00:10:08] Speaker 02:
I'll start by saying it wasn't raised below in the summary judgment brief that starts on page 856.

[00:10:15] Speaker 02:
There's no reference to title searches and there's really no reference to what these additional costs above the cost of the physical closing were that Northwest title claims were not allowed to be charged in the three states.

[00:10:27] Speaker 02:
As for that additional title search that we're now hearing of

[00:10:32] Speaker 02:
A title search is within the tasks that Northwest Title was assigned by the contracts.

[00:10:40] Speaker 02:
The tasks are listed in Section C-42 and C-43, and title search is among those.

[00:10:46] Speaker 03:
Yeah, but what they say is, yes, that's true, but there's different kinds of title searches and that you have to do a more expensive and perhaps additional title search if you're going to get insurance.

[00:11:02] Speaker 03:
Is that true?

[00:11:03] Speaker 03:
I mean, I don't know.

[00:11:04] Speaker 02:
Your Honor, because we dealt with the amended complaint, its allegations, and the contractual language, we have not had discovery on the background of how title searches are conducted, whether a second title search would be necessary.

[00:11:18] Speaker 02:
In this case, HUD is the owner of a foreclosed home.

[00:11:23] Speaker 02:
It's hard to see why a second title search after the first one conducted by Northwest Title would be necessary to confirm what was known

[00:11:32] Speaker 02:
very soon before the closing.

[00:11:36] Speaker 02:
In addition, the question of how HUD did not allow Northwest to make certain charges is something that I think would be handy for the court to know.

[00:11:53] Speaker 02:
The contracts point out that there's a quality assurance process at Section C-52 and

[00:12:00] Speaker 02:
HUD-1 settlement forms, an example is it Appendix 398, were submitted by Northwest Title and HUD reviewed a spot check of these type of forms to see the types of fees that were being charged and in that spot check would notice that certain settlement closing costs were being charged to buyers when they shouldn't have been charged.

[00:12:26] Speaker 02:
And that's why there was a consistent interpretation, contrary to what Northwest Title is arguing.

[00:12:32] Speaker 02:
The affidavits it attaches to its summary judgment response from Mary Casper and John Lindle both say that soon after the Wisconsin and Minnesota contracts were entered into, Northwest Title was contacted by HUD and told that it could not charge closing costs to buyers.

[00:12:54] Speaker 02:
And in addition, Mary Casper, who

[00:12:56] Speaker 02:
worked for a contractor of HUD's said that she was instructed by HUD not to allow closing costs.

[00:13:04] Speaker 01:
Can I ask you a question about insurance, which I realize is not before us because there's no claim here about insurance, but I guess I want to understand how to read the contract and in particular why the presence of the word insurance

[00:13:26] Speaker 01:
in the B41 list of things that they cannot charge for doesn't run counter to the argument that B41 and B42 are unambiguous.

[00:13:44] Speaker 01:
What other insurance could that be referring to?

[00:13:48] Speaker 02:
The section B41?

[00:13:49] Speaker 01:
Yeah, that's the principal.

[00:13:51] Speaker 01:
B41 and 2 are the principal provisions that

[00:13:55] Speaker 01:
Court of Federal Claims relied on to say, unambiguously, this bars the costs that they seek here.

[00:14:06] Speaker 01:
And it lists insurance.

[00:14:07] Speaker 02:
Which will be inclusive of all costs, including but not limited to all labor, supervision, fringe benefits, travel, subcontracts, other direct costs, overhead, general and administrative costs.

[00:14:20] Speaker 01:
It's a long paragraph.

[00:14:21] Speaker 01:
Right.

[00:14:23] Speaker 01:
I don't know, the last 15 words, 20 words?

[00:14:25] Speaker 02:
Title search costs and any licenses, insurance.

[00:14:30] Speaker 02:
The red as a whole, the contract includes a statement that the buyer may obtain title insurance from any title insurance company it chooses that the

[00:14:45] Speaker 01:
contractor Northwest title is to inform the buyer that it can purchase title insurance from any... It seems to me it's one thing to say read as a whole you can see how the earlier provision doesn't actually contradict the later provision, the C whatever series.

[00:15:03] Speaker 01:
But I'm having, I guess what I'm asking for is an explanation of how it doesn't, unless you're just saying

[00:15:09] Speaker 01:
The later provision overrides the earlier one even though the earlier one on its face unambiguously bars this.

[00:15:17] Speaker 02:
The earlier provision saying that the unit price per closing is inclusive of all costs including but not limited to and it says here insurance.

[00:15:26] Speaker 02:
Right.

[00:15:27] Speaker 01:
And then the later provision just says you can buy from anybody which doesn't on its face say including the party to this contract and yet you allowed that.

[00:15:37] Speaker 02:
I would read this

[00:15:40] Speaker 02:
because it's a separate section that says any and all licenses, insurance, certificates, or permits as stated in section C, paragraph 412.

[00:15:49] Speaker 02:
Section C, paragraph 412, which is at page 96 of the appendix, talks about the license, insurance, certificates, and permits that the contractor has to have.

[00:15:59] Speaker 02:
For example, a license...

[00:16:03] Speaker 03:
Liability insurance.

[00:16:04] Speaker 02:
Probably, Your Honor, yes.

[00:16:05] Speaker 02:
A license to provide title insurance that would be granted by a state.

[00:16:11] Speaker 02:
And the insurance, as it says here, required for the performance of the contract and comply with federal, state, county, municipal, and local laws.

[00:16:21] Speaker 02:
And so it's referring to the contractor would be our interpretation and their insurance necessary to perform their business.

[00:16:31] Speaker 02:
B41 is explaining that the costs of conducting a closing are being paid by the government.

[00:16:38] Speaker 02:
And the closing is primarily intended to provide services to a buyer.

[00:16:46] Speaker 02:
And Northwest Title, in its amended complaint, lists it out.

[00:16:51] Speaker 01:
I don't understand about the primarily.

[00:16:53] Speaker 01:
There are two parties to the transaction.

[00:16:55] Speaker 01:
Presumably, they both benefit from the transaction, or they wouldn't be.

[00:16:59] Speaker 01:
entering into it, why is the closing primarily one or the other?

[00:17:02] Speaker 02:
The physical closing allows the deed to be recorded, which is of primary importance to the buyer.

[00:17:11] Speaker 02:
It allows funds to be transferred from the buyer.

[00:17:16] Speaker 01:
That sounds like it's primarily for the benefit of the seller.

[00:17:20] Speaker 02:
Well, I will read from Northwest titles.

[00:17:23] Speaker 01:
Does it matter whether it's primarily or not?

[00:17:26] Speaker 02:
No, not really, Your Honor.

[00:17:28] Speaker 02:
We believe that the closing, which is what the government contracted for, is something that benefits both the buyer and the seller.

[00:17:38] Speaker 02:
And it was intended by HUD that there was an objective of selling homes in the manner that would promote homeownership, to obtain error-free closings, to have deeds properly recorded.

[00:17:51] Speaker 02:
And Northwest stated in its amended complaint

[00:17:54] Speaker 02:
that there were certain tasks that were the type provided to buyers by settlement service providers, and they were title searches, special assessment searches, courier fees, wiring fees, recording fees, and fees for conducting the physical closing with the buyer during which the sale documents are presented, executed, notarized.

[00:18:12] Speaker 02:
That's at appendix 349 to 50 in paragraph 12, and those are part of Northwest's duties in sections C42 and C43.

[00:18:22] Speaker 02:
So the government is contracting to have closings conducted.

[00:18:26] Speaker 02:
And those closings, by doing that, the government is, as seller, is paying the buyer's closing costs they would otherwise pay.

[00:18:38] Speaker 02:
And section B42 makes it clear that except it's explicitly allowed in paragraph C4422 below, the purchaser, lender, and or seller shall not pay any additional costs for closing services

[00:18:52] Speaker 02:
including an additional lender fee.

[00:18:53] Speaker 02:
And as the trial court found, B-42 is a prohibition on the exact cost that Northwest Title is seeking here.

[00:19:02] Speaker 03:
It's seeking to... Maybe, maybe not.

[00:19:04] Speaker 03:
I mean, I'm not sure that's true if there's an extra cost of title search to get insurance.

[00:19:11] Speaker 02:
And the... Northwest provided no evidence in response to the converted motion for summary judgment that would demonstrate that a title search

[00:19:22] Speaker 02:
that a fee was not allowed by HUD.

[00:19:27] Speaker 02:
There is no evidence that can support its claim that it was damaged by the government not allowing that fee, if that in fact happened.

[00:19:37] Speaker 02:
In fact, the bigger issue is that the contracts don't place a duty on HUD at any point to allow Northwest to charge fees, be it for closing costs or title insurance,

[00:19:49] Speaker 02:
Northwest has not demonstrated how the government could breach a duty in the contract when there is no duty to allow fees of the nature to be charged.

[00:20:00] Speaker 03:
So you certainly agree that they had the right to charge for title insurance?

[00:20:06] Speaker 02:
There are statements in the contract that the buyer can choose to purchase title insurance or not.

[00:20:14] Speaker 03:
Yes, they can charge for title insurance, right?

[00:20:16] Speaker 02:
They can.

[00:20:17] Speaker 03:
So the question that they raise is

[00:20:19] Speaker 03:
Well, if we can charge for title insurance, shouldn't we be able to charge for an extra title search related to the title insurance?

[00:20:27] Speaker 03:
And it's a perfectly reasonable position.

[00:20:28] Speaker 03:
Their problem is I don't see that they addressed this below.

[00:20:31] Speaker 02:
They did not, Your Honor.

[00:20:33] Speaker 02:
And again, as we see it, the claim is really they're claiming that they have a business relationship with the buyers and that the government has in some way

[00:20:43] Speaker 02:
interfered with that separate relationship, not that there's a duty in the contract to allow any charges to be made.

[00:20:50] Speaker 02:
And as for Northwest claims related to industry practice, the court explained in the Jowett decision that the appellant must identify an ambiguity in the contract in order to try to use industry practice to explain what a specific term would be a term of art means, and the plaintiff has never

[00:21:13] Speaker 02:
pointed to any specific word in the contract that it claims is ambiguous.

[00:21:21] Speaker 02:
Contrary to what the appellant's counsel said, the trial court did not rely on any industry practice.

[00:21:28] Speaker 02:
Instead, the trial court properly concluded that industry practice should not be used to create an ambiguity where there is none within the actual language of the contract.

[00:21:41] Speaker 02:
And Northwest has not argued that a seller never can pay a buyer's closing costs, nor has it shown that it relied on a competing interpretation of any words within the contract when it entered into the contract.

[00:21:54] Speaker 02:
There's no evidence also in the record of any contracts with the buyer or the solicitation which the appellant has relied on.

[00:22:05] Speaker 02:
The trial court provided the appellant with an opportunity to provide evidence

[00:22:09] Speaker 02:
in response to our motion dismissed, which was converted into a motion for summary judgment based on the attachment of the contracts.

[00:22:18] Speaker 02:
And again, the conduct of the parties is also only considered if the contract is ambiguous.

[00:22:26] Speaker 02:
And here there is no ambiguity that's been demonstrated.

[00:22:30] Speaker 02:
Even if there were the HUD's conduct contrary to appellant's claim,

[00:22:35] Speaker 02:
is consistent with a note in two affidavits attached to their opposition to summary judgment that within a brief period after the contracts were signed, HUD informed Northwest Title that it could not charge closing costs.

[00:22:53] Speaker 02:
And for those reasons, we request that the court affirm the decision of the trial court.

[00:22:59] Speaker 02:
And if the court has no further questions.

[00:23:05] Speaker 02:
Thank you.

[00:23:09] Speaker 00:
Thank you.

[00:23:10] Speaker 04:
If I may just make a brief rebuttal.

[00:23:15] Speaker 04:
I'm not, I'm fairly certain I understand where the court is coming from on these issues, but I need to rebut the appearance that's given that somehow in these contracts that there are duties that merge the buyer and the seller under one agreement.

[00:23:35] Speaker 04:
These are two separate duties.

[00:23:37] Speaker 04:
The contract was clearly always made for the benefit of representing sellers.

[00:23:41] Speaker 04:
And to take language and say, well, we're also supposed to do this for buyers because it's all part of the closing.

[00:23:48] Speaker 04:
I think that's getting a little bit sloppy as it relates to actual real estate practices where there is a clear line of demarcation as to what's done for the seller and what's done for the buyer.

[00:23:59] Speaker 04:
The contract reference had a concern about the buyers.

[00:24:04] Speaker 04:
They said two things.

[00:24:05] Speaker 04:
They said, make us look good and don't get us sued for violation of RESPA.

[00:24:10] Speaker 04:
And I can't overstate the concern regarding RESPA violations that if there's too much, that sellers do too much for the benefit of the buyer, that in this case would allow Northwest Title to collect title insurance fees because they basically were giving away the other fees

[00:24:34] Speaker 04:
That would be a respite violation.

[00:24:35] Speaker 04:
The contract was never interpreted that way, and any clause that's interpreted that would require that should be stricken from being illegal or requiring an illegal act.

[00:24:47] Speaker 04:
So I think there's a real danger of getting everything too merged between duties as sellers and duties of buyers.

[00:24:57] Speaker 04:
We were always very clear on what we were supposed to do.

[00:25:01] Speaker 04:
The buyers were to be an entirely separate relationship, which we were encouraged to pursue so we could earn more fees.

[00:25:10] Speaker 04:
The discounting came later.

[00:25:12] Speaker 04:
I have nothing further to add.

[00:25:14] Speaker 04:
Thank you.

[00:25:18] Speaker 00:
Okay.

[00:25:19] Speaker 00:
Thank you.

[00:25:19] Speaker 00:
Thank you both.

[00:25:20] Speaker 00:
The case is taken under submission.