A Texas appellate court recently affirmed a lower court’s decision granting summary judgment and holding that a title agent and its individual employee were not liable to a nonparty to the escrow agreement for their disbursement of escrow funds, regardless of whether the nonparty contributed said funds.  See Muller v. Stewart Title Guar. Co., 525 S.W.3d 859 (Tex. App. 2017).   In the case, two entities (“Purchaser” and “Seller”) entered into an escrow agreement in preparation for the sale of a property.  Plaintiff, one of Purchaser’s three members, contributed $1,172,000 to the escrow account.  The parties eventually cancelled the sale, and Purchaser’s managing member sent a letter to the defendant title agent’s employee, asking that all escrow funds be sent to Purchaser’s business account.  Although the employee originally stated he could only return the funds to the accounts from which they originated (i.e., plaintiff’s account), he eventually agreed to disburse them to Purchaser’s account.  Plaintiff later sued both the title agent and the employee, for, among other things, breach of contract and breach of fiduciary duty for the purported wrongful disbursement of plaintiff’s funds.  After discovery, the trial court granted the defendants’ motion for summary judgment dismissing these claims.

On appeal, the appellate court affirmed.  First, the Court held that the trial court properly dismissed the breach of contract claim because plaintiff was not a party to or intended third-party beneficiary of the escrow agreement.  Although plaintiff contributed personal funds to the escrow account, the agreement itself was between Purchaser and Seller and could only be modified by the entities in writing.  Thus, the breach of contract claim should have been dismissed.  Second, the Court held that the trial court correctly dismissed the claims that defendants breached a fiduciary duty to plaintiff.  Again, because plaintiff was not a party to or third-party beneficiary of the escrow agreement, defendants did not owe him a duty and his claim should have been dismissed.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Clarissa Gomez at cgomez@riker.com.