Attorney For Lender Did Not Owe Any Fiduciary Duties To Borrower As An Escrow Agent

Originally published by David Fowler Johnson.

In JTREO, Inc. v. Hightower & Assocs., the buyer of a note and mortgage sued the attorney for the lender who facilitated the transaction by loaning money to the buyer for breach of fiduciary duty arising from the fact that there was no mortgage title policy endorsement as represented in the transaction. No. 03-19-00255-CV 2020 Tex. App. LEXIS 4523 (Tex. App.—Austin June 18, 2020, no pet. history). The attorney filed a no-evidence motion for summary judgment, alleging that he did not owe a fiduciary duty. The trial court granted the motion, and the plaintiff appealed. The court of appeals affirmed. The court noted that there was no written escrow agreement, and that the attorney was not a properly appointed escrow agent as a matter of law and did not owe any fiduciary duties as an escrow agent. The court stated:

Furthermore, the evidence conclusively establishes that at all relevant times, Hightower served solely as Libertad’s attorney with respect to the transaction, and JTREO acknowledged as much in a two-page disclosure that it signed. Texas courts have routinely held that no fiduciary duty exists between a lender (i.e., Libertad and its agent Hightower) and a borrower (i.e., JTREO). Moreover, as Libertad’s attorneys, Hightower could not have held the funds in “escrow” for its own principal (or anyone else), because as long as the funds are in the possession and control of the principal’s attorney, they remain subject to the control of the principal.

Id. Nonetheless, JTREO contends that Hightower “served as the closing/escrow agent for the sale of the Note” through its actions, despite the lack of a written escrow agreement and Hightower’s undisputed role as Libertad’s attorneys. The court disagreed because the attorney was not acting as a title company and earned no fees for being an escrow agent. “We hold that Hightower did not owe a fiduciary duty to JTREO as a matter of law…” Id.

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