Daily Development for
Friday, May 26, 1995

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

ESCROWS; DISCLOSURE DUTY: A title insurer/escrow agent has no duty to disclose information it receives from one party to all other parties to the transaction. Gebrayel v. Transamerica Title Ins. Co., 888 P.2d 83 (Or. App. 1995). Under Oregon law, the duty of an escrow agent is to remain neutral with no obligation to either party to the transaction except to carry out the terms of the escrow instructions. An escrow agent did not breach its duty of neutrality by failing to disclose to the purchasers, prior to the closing, existence of a possible claim that was not shown on public record but was disclosed to the escrow agent by the seller. No duty was breached even if prior knowledge of potential claim would have given the purchasers an opportunity to better assess the risk of purchasing the property.

Compare: Burkens v. Ticor Title Ins. Co. of Calif., 813 P.wd 710 (Ariz. 1991) (Title insurer/escrow agent has duty to warn one party to escrow that other party may be carrying out a fraudulent scheme through misuse of purchase money subordination right.); Styrk v. Cornerstone Investments, 810 P.2d 1366 (Wash Ct. App. 1991)(Attorney/escrow has fiduciary duty to warn advise seller to seek legal counsel concerning subordination arrangements for purchase money loan.)

Comment: The editor is more comfortable with the strictly neutral position of the escrow dictated in the Oregon decision. In a residential transaction, however, the "proper" role of the escrow agent may be subordinated to the "expected" role in the eyes of the consumer customers. If there are no attornies in the deal, and the parties are relying upon the escrow as the only trained party, shouldn't the escrow at least have the responsibility to counsel a party that circumstances are sufficiently unusual that the party should consider seeking legal counsel?

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. Contact Shawn Kaminsky at the ABA. (312) 988 5260. Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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