Escrow Agent's Duties

Austin Real Estate Dispute Attorney

Feb 27, 2015 — by Jeff Mundy
Tags: Civil Litigation

A viable breach of fiduciary duty claim requires the following proof: (1) a fiduciary relationship between the plaintiff and defendant; (2) a breach of the fiduciary duty to the plaintiff; and (3) injury to the plaintiff (or benefit to the defendant) as a result of the breach.*fn21

In certain formal relationships, such as an attorney-client or trustee relationship, a fiduciary duty arises as a matter of law.*fn22 Under certain specific circumstances, courts also recognize an informal fiduciary duty. An informal fiduciary duty "arises separate and apart from business relationships."*fn23 Informal fiduciary duties are not owed in business transactions unless the special relationship of trust and confidence existed prior to, and apart from, the transaction at issue in the case.*fn24 It is well settled that "not every relationship involving a high degree of trust and confidence rises to the stature of a fiduciary relationship."*fn25

There is no question that an escrow agent owes fiduciary duties as a matter of law.*fn26 Specifically, an escrow agent's fiduciary duty consists of (1) the duty of loyalty, (2) the duty to make full disclosure, and (3) the duty to exercise a high degree of care to conserve the money and pay only those entitled to receive it.*fn27

An escrow agent must be appointed through a specific legal document that imparts a specific legal obligation.*fn28 And an escrow agent's duties are strictly limited to those set forth in the escrow agreement.*fn29 Here, it is undisputed that there is no escrow agreement between CTS and Flagstar or between CTS and Excel.

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