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Maxfield v. Martin - 12/27/2007

Arizona Court of Appeals Division One Holds Escrow Agent Has a Fiduciary Duty to Confirm the Identity of an Individual Listed as a Party to the Escrow Agreement.


Plaintiff sued Defendant, the title company that acted as the escrow agent in a fraudulent loan transaction secured by a deed of trust on Plaintiff’s property without her knowledge. Defendant moved for summary judgment on the grounds that, as a matter of law, Defendant owed no fiduciary duty to Plaintiff because, as she alleged, she had not actually been a party to the action. Explaining that an escrow’s fiduciary duties extend only to the parties to the escrow agreement, the trial court granted the motion and denied Plaintiff’s motion to amend the complaint to add a negligence claim against Defendant because the court had already determined Defendant owed Plaintiff no duty. This appeal followed.

The Arizona Appeals Court reversed and remanded. The Court noted that an escrow agent has a fiduciary relationship of trust and confidence to the parties to the escrow. The Court held that in the context of a fraudulent loan where an individual’s home is used to secure a mortgage without that individual’s knowledge (and the escrow instructions identify that individual by name such that recording the deed of trust has the potential to directly harm the named individual), the escrow company owes fiduciary duties to the party named in the transaction even when the named individual is unaware of the transaction. A title company acting as an escrow agent should, pursuant to its duty of diligence, confirm the identity of the named individual.

Judge Thompson authored the opinion; Judges Norris and Barker concurred.

Posted On: 1/3/2008