451 S.W.3d 490
Tex. App.2014Background
- Flagstar funded Florida loans through Excel; Excel used LSD as escrow agent for closing and CTS as title agent.
- Funds were wired from Flagstar to CTS, not directly to Excel’s or Flagstar’s own accounts, per closing instructions.
- CTS issued title commitments naming Excel as insured, listed prior liens as exceptions, enabling disbursement before lien satisfaction.
- Loans were thought closed and later securitized, but were not funded; funds were misappropriated by LSD and CTS/Walker before discovery.
- Flagstar repurchased the loans after discovery of fraud; Flagstar sued CTS, Walker, First American (and LSD/Excel in separate action).
- Judgment at trial was take-nothing against Flagstar on negligence claims; directed verdict denied on fiduciary duty claim; First American’s vicarious liability argued and rejected on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to sue on Excel’s assigned claims | Flagstar has injury and an assigned claim | CTS lacks duty; no standing | Flagstar has standing; CTS cross-point overruled |
| Whether CTS/Walker owed fiduciary duty to Flagstar | CTS owed fiduciary duty as escrow/title agent | No fiduciary duty; no escrow agreement | Directed verdict affirmed; no fiduciary duty as matter of law |
| Bailment claim viability | CTS/Walker were bailees of funds | No express/implied bailment; negligence theory controls | Harmless error; bailment claim rejected or moot due to negligence verdict |
| Spoliation instruction proper | Missing communications show spoliation | No intentional concealment; not reversible error | No abuse of discretion; spoliation instruction denied |
| Vicarious liability of First American | First American liable for CTS/Walker | No vicarious liability | Affirmed; vicarious liability not reached based on other grounds |
Key Cases Cited
- City of Fort Worth v. Pippin, 439 S.W.2d 660 (Tex. 1969) (establishes fiduciary duties of a title company under agency theory)
- Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997) (fiduciary/duty standards; trust and confidence considerations)
- Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276 (Tex. 1998) (informal fiduciary duties and high-trust relationships)
- Netco, Inc. v. Montemayer, 352 S.W.3d 733 (Tex. App.—Houston [1st Dist.] 2011) (escrow/title agent duties; lien releases and closing duties)
- Lacy v. Ticor Title Ins. Co., 794 S.W.2d 781 (Tex. App.—Dallas 1990) (escrow/closing duties and fiduciary considerations)