Escrow Agreements

Black v Metro Title, Inc, 2006 Wis App 52, 712 NW2d 395 (Wis Ct App 2006).

Facts: Pursuant to a marital settlement agreement and divorce judgment, the wife was to convey her interest in the property to the husband and receive half of the equity. When the husband refinanced the property, the wife provided a quitclaim deed for her interest in the property but the escrow agent for the closing refused to pay her half the proceeds and instead paid the husband the full proceeds. The wife was not a party to the escrow agreement for the closing.

The wife sued the escrow agent for negligence in its duties as escrow agent. On summary judgment, she argued that the escrow agent owed fiduciary duties to her as a beneficiary of the escrow. The lower court ruled in favor of the escrow agent because the wife was not a party to the escrow. The wife subsequently received a judgment against the husband for her share of the equity, but the husband had already spent the funds. The wife appealed the order of summary judgment.

Holding: Affirmed. An escrow agent owes fiduciary duties only to the parties to an escrow. When a beneficiary is a party to the escrow, the agent will owe fiduciary duties to the beneficiary. When a beneficiary is not a party to the escrow, the agent does not owe fiduciary duties to the beneficiary. However, an escrow agent may owe fiduciary duties to a beneficiary when evidence of fraud, self-dealing, or conflict of interest exists.

Because the wife did not show that she was a party to the escrow or any evidence of fraud, self-dealing, or conflict of interest, the court applied the general rule. The wife's presence at the transaction and her expected payout were not sufficient to make her a party to the escrow. The court concluded that the escrow agent owed no fiduciary duties to the wife.

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