Noroian v. Fidelity Nat'l Title Ins. Co., 2004 WL 308173 (Cal.App. 5 Dist.) (unpublished).
From the April, 2004 issue of The Title Insurance Law Newsletter
A person who did not sign escrow instructions was not a party, and had no right to demand documents from the escrow file.
George Noroian owned a house, peach orchard and cannery, which were heavily leveraged. Maurice Green agreed to buy all the loans, and extend more credit or Noroian. An escrow was set up at Fidelity National for the deposit of the loan assignments and Green's new money. Green did not fund the new money in full, and Noroian claimed this put him over a barrel at harvest season. Noroian defaulted, and Green tried to foreclose. Noroian stalled him for years by filing three bankruptcies, then filing three successive lawsuits to contest the foreclosure.
After all the other suits were settled, Noroian's only remaining claim was against Fidelity as escrowee. Noroian alleged that Fidelity had delayed turning over its escrow files for the Green loan, and that the files as produced were incomplete because they failed to include "the original written escrow instructions between Noroian and Green." Noroian said the escrow documents would support his now-dismissed claims that a Mr. Levin, an attorney hired by Green, had defrauded him.
Fidelity moved for summary judgment, saying it owed no duty of disclosure to Noroian because he was never a party to the escrow, that no escrow was created because none of the parties signed the escrow instructions, and that Noroian had suffered no damages because Fidelity produced its entire file while all the parties to the alleged fraud were still in the case.
The trial court found that the escrow instructions were never signed. More importantly, they were between only Green and original lender, FmHA; Noroian was not a party. Noroian produced some hand-written notes of an escrow officer that suggested that he intended to create a separate escrow with Noroian as a party. However, Noroian could not produce such instructions, either signed or unsigned. Therefore, the trial court ruled that Noroian was not a party to any escrow, and Fidelity had no duty to him.
The appeals court affirmed. It said:
No valid escrow is created until there exists a binding and enforceable contract between the parties to the underlying transaction, as where they have submitted mutual or matching escrow instructions. (3 Miller & Starr, Cal. Real Estate, supra, ยง 6.6, pp. 16 17.) This is so because, until an enforceable contract exists, either party may withdraw from the transaction. (Ibid.) Here, since there was no enforceable agreement by the Green defendants either with the three note holders to purchase Noroian's debt or with Noroian to restructure the debt there was no formal escrow.
Further, Noroian would not have been a party even if the instructions had been signed. Therefore, he "was owed no duty by Fidelity to comply with his requests regarding it." As to the notes suggesting another intended escrow, the court said:
Noroian appears to claim there was an additional escrow agreement between himself and the Green defendants, as evidenced by the escrow officer's (Bergen's) notes. But these notes show, if anything, just the opposite: there was no formal loan agreement between Noroian and the Green defendants, and no escrow.
The court further found that Noroian never had a claim of fraud against attorney Levin, so he could not have been damaged by any delay in turning over the escrow documents.
This decision is useful for its black-and-white pronouncements that an escrow exists only when instructions are signed, and that the escrowee only owes a duty to the signatories.
