From the February, 2002 issue of The Title Insurance Law Newsletter
Ohio holds that an escrowee is not responsible for counseling an escrow party that it is may be making a bad deal.
David Weaver sold a house in Midvale to John and Sharon Swinderman on land contract. The Swindermans got a mortgage loan to pay off the land contract balance, and a title commitment from Tower City Title that showed a federal tax lien against Weaver of about $7,500. Tower City Title conducted the refinance closing escrow. The Swindermans agreed to pay off Weaver's tax lien. They later alleged that it was Tower City that advised them to do so. They apparently did not negotiate a credit of that amount against the balance owed on the land contract.
The Swindermans sold the property several years later and learned at that time that there were two more small tax liens against Weaver that attached to the property. They paid off the liens. Tower City Title reimbursed the Swindermans.
Apparently aggravated by Weaver's liens, the Swindermans sued him and Tower City Title. The claim against the title agency was primarily that it had a duty, as escrowee, to advise the Swindermans not to voluntarily pay Weaver's tax debt on the first lien. On the day of trial, the Swindermans' lawyer called Tower City's attorney and told him the trial had been cancelled. In fact, the trial was held, and the court entered judgment in favor of the Swindermans against Tower City. The title agency appealed.
The appeals court accepted Tower City's view that an escrowee does not have to warn a party that it might be making an unwise deal.
"Tower City Title maintains that it did not have a fiduciary duty to advise the Swindermans on either the merits or adverse consequences of assuming Weaver's federal tax lien. We agree."
The court noted that "the duty of the escrow agent is to carry out the terms of the agreement as intended by the parties." The Swindermans failed to make the escrow instructions part of the trial record. "Without the escrow agreement, we are unable to determine whether Tower City Title breached any of its fiduciary dutiesÂ…" and there was no basis for a judgment that the instructions had been breached.
Swinderman v. Weaver, 2002 WL 24322 (Ohio App. 5 Dist.) (unpublished).
