NETCO, INC. v. Montemayor, 352 S.W.3d 733

In June 2002, Montemayor entered a contract for deed to buy 8712 Kimwood in Houston; she later pursued a mortgage/deed of trust structure with Flores.
NETCO conducted the December 10, 2003 closing as title company and escrow agent, preparing HUD-1 and a title commitment.
Sterling Bank held a lien; the commitment acknowledged it, but the HUD-1 settlement statement did not list Sterling Bank as a lienholder to be paid.
The escrow disbursement paid $88,703.35 to Logan instead of Sterling Bank, and Sterling Bank was not paid or released.
Montemayor and Flores sued NETCO on April 18, 2007; Logan settled for $35,000; a jury addressed limitations and diligence, and a bench trial adjudicated damages.
The trial court awarded $41,135.20 economic damages and $50,000 in mental anguish, offset by Logan’s settlement to render $56,135.20, later reversed in part on appeal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Accrual date and discovery rule applicability	Montemayor and Flores argue discovery rule delays accrual	Netco asserts accrual began at closing, limiting claims	Discovery rule does not apply to accrual date; accrual at closing required, but service diligence supports defenses.
Diligence in service of process	Montemayor and Flores exercised due diligence	NETCO argues lapses show lack of diligence as a matter of law	Evidence supports jury finding of due diligence; service timely within four months post-limitations.
Breach of fiduciary duty evidence	NETCO breached its duties as escrow agent by not paying/releases	NETCO contends it complied with instructions and no breach proven	Sufficient evidence supports breach of fiduciary duty.
Mental anguish damages award	Damages warranted by economic loss and distress from NETCO's error	Economic loss alone not enough; no severe mental distress shown	Mental anguish damages reversed; award not supported by law.

Barker v. Eckman, 213 S.W.3d 306 (Tex. 2006) (discovery rule defers accrual until plaintiff knows or should know)
Via Net v. TIG Ins. Co., 211 S.W.3d 310 (Tex. 2006) (discovery rule analysis in fiduciary-duty contexts)
S.V. v. R.V., 933 S.W.2d 1 (Tex. 1996) (fiduciary misconduct becomes apparent; accrual when wrongful act known or should be known)
Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453 (Tex. 1996) (fiduciary-related injuries accrue upon discovery of act)
Ashley v. Hawkins, 293 S.W.3d 175 (Tex. 2009) (burden shifts to plaintiff to prove diligence after limitations defense)
Proulx v. Wells, 235 S.W.3d 213 (Tex. 2007) (diligence measured by ordinarily prudent person; lapses require explanation)
G.F.S. Ventures, Inc. v. Harris, 934 S.W.2d 813 (Tex. App.—Hou. (1st Dist.) 1996) (secretary of state becomes agent for service when agent unavailable or not maintained)
Taylor v. Thompson, 4 S.W.3d 63 (Tex. App.—Hou. (1st Dist.) 1999) (duty to exercise due diligence continues from filing to service; unexplained lapses may be fatal)
Parkway Co. v. Woodruff, 901 S.W.2d 434 (Tex. 1995) (mental anguish damages require high degree of distress or disruption)
Saenz v. Fid. & Guar. Ins. Underwriters, 925 S.W.2d 607 (Tex. 1996) (economic loss alone cannot support mental anguish without severe distress)