1

The Honorable Dean Whipple, United States District Judge

for the Western District of Missouri.

__________

No. 95-1801

__________

Coldwell Banker Relocation *

Services, Inc., *

*

Plaintiff - Appellee, *

*

v. *

*

TRW Title Insurance Company, ** Defendant - Appellant. *

Appeal from the United States

District Court for the

Western District of Missouri

[UNPUBLISHED]

__________

Submitted: December 13, 1995

Filed: January 8, 1996 __________

Before MAGILL, BRIGHT, and MURPHY, Circuit Judges. __________

PER CURIAM.

After a two day bench trial, the district court1 entered

judgment against TRW Title Insurance Company (TRW), holding it

responsible to Coldwell Banker Relocation Services, Inc. (Coldwell)

for an amount Coldwell paid to the purchasers of a residential

property. The purchasers received defective title when a TRW title

insurance agent stole funds from an escrow account rather than

retiring the prior mortgage. TRW appeals from the judgment, and we

affirm.

TRW issues title insurance through agents, one of whom was

John R. McCarty. McCarty's contract with TRW specified that he was
 2

Coldwell obtained a default judgment against McCarty Title

Services, Inc., of which McCarty was president. McCarty was

convicted and sentenced for defalcation before the trial began.

-2-

its agent for the issuance of title insurance but not for escrow

services performed during closings of real estate transactions.

McCarty performed escrow services at the closing on November 10,

1992 which gave rise to this case; TRW was the title insurer, and

Coldwell owned legal title to the Kansas City house being sold.

Rather than applying the purchase price to pay off the existing

mortgage, McCarty kept the money. The purchasers sued Coldwell

because they did not receive title free of the prior mortgage.

Coldwell paid off the prior mortgage and brought this action

against TRW under the theory that a principal is responsible for

authorized acts of its agent.2

Although the agency agreement explicitly stated that McCarty

was not an agent of TRW when performing escrow services, the

district court concluded that McCarty had implied authority to act

as TRW's agent during the closing and that TRW was therefore liable

for the loss incurred by Coldwell because of his theft. The court

also found that Coldwell had a right of equitable subrogation, and

invoked its equitable powers because it concluded TRW was more at

fault than Coldwell in producing the loss.

TRW argues that the contractual clause excluding escrow

services from McCarty's agency should control. TRW claims that

even if McCarty did have authority at some point, it withdrew that

authority before the date of the closing. It also contends that

any authorization of McCarty did not extend to Kansas, the site of

the real estate. Finally, TRW argues that the court erred in

finding liability based on equitable subrogation and under its

general equitable powers.

There is ample evidence in the record, however, to support the
-3-

court's judgment based on its findings and legal conclusions

regarding agency. TRW knew that McCarty regularly performed escrow

services at the closings of transactions on which he had written a

TRW title insurance policy. It also knew that McCarty used the TRW

logo on a flyer which described McCarty Title Services Company as

a "title insurance and escrow agency." Before the sale contract

for the transaction in question here was signed, TRW learned that

McCarty had been terminated previously by another title insurer for

refusing to allow an audit of his escrow account and that the

insurer suspected foul play. TRW attempted to audit McCarty in

September 1992, but McCarty would not cooperate. TRW then gave

McCarty notice that his agency would be terminated in thirty days,

but it later extended that period.

Prior to the closing at issue here, TRW did take some steps to

limit McCarty's activities, but a letter to McCarty listing the

transactions he should not close did not mention the transaction in

this case. Finally, TRW had issued an Insured Closing Protection

Letter (ICPL) to the underwriter in this case. Although TRW

purports to have canceled the ICPL before the closing, one of its

officers made comments that led the underwriter to believe that it

would continue to indemnify the underwriter for harms caused by

McCarty related to the transaction. The district court concluded

that the facts were sufficient to constitute an implied agency

under Missouri law and found for Coldwell.

After a thorough review of the record, we conclude that the

findings and legal conclusions of the district court regarding

McCarty's implied authority to act as the agent of TRW while

performing escrow services at the closing were neither clearly

erroneous nor contrary to law. We therefore affirm the judgment on

that basis without further discussion. See 8th Cir. R. 47B.
-4-

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.