Wisconsin’s Appellate Court Holds That Title Company Was Not Liable for Title Agent’s Escrow Disbursements

The Court of Appeals of Wisconsin recently held that a title company could not be held liable for the acts of its title agent in disbursing escrow funds from a construction loan.  See Haselow v. Vilas Title Serv., Inc., 2015 WI App 68 (2015).  In the case, the borrowers entered into a construction loan agreement with a lender, and the construction company requested a particular title agent to handle the escrow disbursement.  At the closing, which the title agent did not attend, a bank employee gave the borrowers one of the title agent’s business cards which listed the title company’s name on it.  Additionally, some of the title agent’s other forms stated that it was the “issuing agent” of the title company.  A few years later, after the title agent allegedly failed to properly monitor the construction, the borrowers filed a lawsuit and named the title company as a defendant.  Though the parties conceded that the title agent did not have actual authority to act as the title company’s escrow disbursing agent, the borrowers claimed that the agent had apparent authority.  Under Wisconsin law, a party alleging apparent authority must show “(1) acts by the agent or principal justifying belief in the agency; (2) knowledge by the party sought to be held; and (3) reliance consistent with ordinary care.”  The district court granted the title company summary judgment, holding that there was no evidence that the title company knew of the agent’s acts that gave rise to this claim.  The Court of Appeals affirmed, holding that the business card and other forms only stated that the title agent acted as the title company’s agent for issuing purposes.  Because none of the documents mentioned escrow disbursement, and because the escrow disbursement form itself did not mention the title company, there was no evidence that the title company knew of the title agent’s acts that gave rise to this claim.

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