ILNews

Title company didn't have authority to close real estate deal

Back to TopE-mailPrintBookmark and Share

For the first time, the Indiana Court of Appeals has decided that a title insurance agent is not also an agent of the title insurance company with respect to escrow and closing services.

The issue arose in Fidelity National Title Insurance Company v. Rhys Mussman and Sally Mussman, No. 64A03-0905-CV-204, in which the Mussmans were awarded $1.6 million on summary judgment on their complaint alleging conversion of funds held in an escrow account by Intercounty Title Company. Fidelity National Title Insurance Company hired ITC as its title insurance agent based on an issuing agency agreement.

The Mussmans contracted to sell real estate for $1.6 million, in which the purchase agreement provided that ITC would issue owner’s and mortgagee’s title insurance policies. ITC also acted as closing agent and escrow agent for the parties. Fidelity didn’t have any contact with the parties during the transaction.

The Mussmans later discovered insufficient funds in ITC’s escrow account when they tried to collect their money. The escrow account funds had been stolen by ITC’s owner and others as part of a Ponzi-like scheme.

The Mussmans sued for conversion and theft against ITC and its owner and filed an amended complaint alleging negligence by Fidelity.

The Mussmans argued on appeal that ITC had implicit actual authority as Fidelity’s agent to close the action based on the agreement and conduct of the companies. They emphasized the fact that Fidelity had and exercised the right to audit ITC’s closing records and escrow accounts.

The appellate court used Southwest Title Insurance Co. v. Northland Building Co., 552 S.W.2d 425 (Tex. 1977), and Proctor v. Metropolitan Money Store Corp., 579 F.Supp.2d 724 (D. Md. 2008), to conclude that Fidelity’s authority to audit ITC’s escrow accounts doesn’t convert ITC’s limited agency to issue title insurance commitments and polices into a broader general agency in which Fidelity has vicarious liability as the principal.

“We conclude that neither the indemnification provisions in the Agreement, nor ITC’s issuance of policies and collection and remittance of premiums confers a sufficient benefit upon Fidelity to establish a general agency relationship that does not otherwise exist,” wrote Judge Edward Najam. “Thus, we agree with the court in Proctor that the primary purpose for general escrow account requirements, including reconciliation, access for audits, and indemnification, is to minimize the risk of loss under the title insurance policies, and even allegations of vicarious liability like the ones raised in this case.”

There’s no evidence Fidelity conducted any business other than the issuance of title insurance or that ITC had any more authority from Fidelity than to issue its polices, he continued.

Even if the agreement and conduct of the companies implied actual authority, it’s well settled that a determination of actual authority focuses on the belief of the agent and there’s no designated evidence showing whether ITC believed it had authority to conduct escrow or closing services on Fidelity’s behalf.

Fidelity is entitled to summary judgment on the Mussmans’ complaint.
 

ADVERTISEMENT

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. All the lawyers involved in this don't add up to a hill of beans; mostly yes-men punching their tickets for future advancement. REMF types. Window dressing. Who in this mess was a real hero? the whistleblower that let the public know about the torture, whom the US sent to Jail. John Kyriakou. http://www.nytimes.com/2013/01/26/us/ex-officer-for-cia-is-sentenced-in-leak-case.html?_r=0 Now, considering that Torture is Illegal, considering that during Vietnam a soldier was court-martialed and imprisoned for waterboarding, why has the whistleblower gone to jail but none of the torturers have been held to account? It's amazing that Uncle Sam's sunk lower than Vietnam. But that's where we're at. An even more unjust and pointless war conducted in an even more bogus manner. this from npr: "On Jan. 21, 1968, The Washington Post ran a front-page photo of a U.S. soldier supervising the waterboarding of a captured North Vietnamese soldier. The caption said the technique induced "a flooding sense of suffocation and drowning, meant to make him talk." The picture led to an Army investigation and, two months later, the court martial of the soldier." Today, the US itself has become lawless.

  2. "Brain Damage" alright.... The lunatic is on the grass/ The lunatic is on the grass/ Remembering games and daisy chains and laughs/ Got to keep the loonies on the path.... The lunatic is in the hall/ The lunatics are in my hall/ The paper holds their folded faces to the floor/ And every day the paper boy brings more/ And if the dam breaks open many years too soon/ And if there is no room upon the hill/ And if your head explodes with dark forbodings too/ I'll see you on the dark side of the moon!!!

  3. It is amazing how selectively courts can read cases and how two very similar factpatterns can result in quite different renderings. I cited this very same argument in Brown v. Bowman, lost. I guess it is panel, panel, panel when one is on appeal. Sad thing is, I had Sykes. Same argument, she went the opposite. Her Rooker-Feldman jurisprudence is now decidedly unintelligible.

  4. November, 2014, I was charged with OWI/Endangering a person. I was not given a Breathalyzer test and the arresting officer did not believe that alcohol was in any way involved. I was self-overmedicated with prescription medications. I was taken to local hospital for blood draw to be sent to State Tox Lab. My attorney gave me a cookie-cutter plea which amounts to an ALCOHOL-related charge. Totally unacceptable!! HOW can I get my TOX report from the state lab???

  5. My mother got temporary guardianship of my children in 2012. my husband and I got divorced 2015 the judge ordered me to have full custody of all my children. Does this mean the temporary guardianship is over? I'm confused because my divorce papers say I have custody and he gets visits and i get to claim the kids every year on my taxes. So just wondered since I have in black and white that I have custody if I can go get my kids from my moms and not go to jail?

ADVERTISEMENT