Procedural Posture

Appellants, escrow holder and officer, challenged the judgment of the Superior Court of Alameda County (California), which found appellants and respondent beneficiary had defrauded respondent lender and were liable for their negligence.

Overview

Appellants, escrow holder and officer, opened an account for a real property financing transaction in which respondent lender loaned respondent beneficiary money to pay off the balance of a first deed of trust on property. Respondent lender was to receive a note secured by a recorded deed of trust on the property. Appellants understood the terms of the transaction. Appellant escrow officer knew of another deed of trust to be recorded on the property and of respondent beneficiary’s intent to defraud respondent lender. Respondent beneficiary and appellants recorded documents for a second loan and closed respondent lender’s escrow account without following his instructions. The trial court found that appellants and respondent beneficiary defrauded respondent lender. Appellants did not specifically request a finding of fact on the question of comparative negligence so the court held that the trial court found no negligence by respondent lender. The court held that substantial evidence showed that there was a breach of fiduciary duty equaling negligence. Respondent lender’s oral instructions to appellants were sufficient to create a binding oral agreement. The judgment was affirmed. Parties’ litigation attorneys California appeal.

Outcome

The court affirmed the judgment in favor of respondent lender because appellants escrow holder and officer, and respondent beneficiary negligently failed to perform escrow instructions resulting in respondent lender being defrauded. The court found no contributory negligence on the part of respondent lender.