Opinion ID: 1833843
Heading Depth: 1
Heading Rank: 5

Heading: Fisher's Claim Against Locators as an Escrow Agent

Text: The final issue raised by Fisher is whether Locators breached its duty as an escrow agent. [7] Fisher specifically alleges that a breach occurred (1) when Locators failed to advise him that Comer Plantation, Inc., had filed a declaratory-judgment action seeking to have the earnest money disbursed to it and (2) when, in that declaratory action, Locators did not disclose to the Jefferson Circuit Court that there was a dispute concerning the earnest money. We addressed the duties of an escrow agent in Gurley v. Bank of Huntsville, 349 So.2d 43 (Ala.1977). There, we explained: An escrow agent is generally considered to be the agent of both parties to an escrow agreement. Such an agent is akin to a special agent and is limited in its liability to the proper performance of those duties and obligations specifically delineated in the escrow agreement for the achievement of a specific goal. The escrow instructions constitute the full measure of the agent's obligations and any other matters which arise in the transaction are collateral to the specific objectives of the escrow agreement. 349 So.2d at 45 (citations omitted). In that case, the escrow agent, which was a bank, held earnest money deposited in conjunction with a sale of stock. The purchaser gave the seller a promissory note in exchange for the stock. The seller and the purchaser, however, did not create a security interest in the stock. During the period in which the bank was acting as an escrow agent, it lent money to the prospective purchaser and secured the loan by taking a security interest in the stock. When the purchaser became delinquent on its loan to the bank, the bank foreclosed on the stock. The seller sued the bank, alleging breach of a fiduciary duty to disclose its arrangement with the purchaser. We held that the bank's duties as an escrow agent were limited to the transaction that was the subject of that relationship. Id. at 46. In Gurley, the transaction between the seller and the purchaser and the transaction between the purchaser and the bank were found to have been entirely separate and distinct; therefore, because the alleged breach was collateral to the escrow agreement, the bank did not violate its limited duty to the seller. Id. at 45. In the present case, however, the failure of Locators to notify Fisher of the pending declaratory-judgment action went to the essence of the escrow agreement. The purpose of the declaratory-judgment action was to determine the proper recipient of the earnest money held in escrow. Indeed, disbursement of this money to the proper party was the sole duty undertaken by Locators. The failure of Locators to notify Fisher, who had an interest directly opposite that of Comer Plantation, Inc., violated this duty by depriving Fisher of the opportunity to oppose the complaint of Comer Plantation, Inc., for a declaratory judgment. Had Fisher known of the declaratory action, he could have exercised his right to intervene. Locators' breach of its duty as an escrow agent, however, prevented Fisher from exercising this right. The summary judgment was improper as to Fisher's claim against Locators alleging breach of its escrow duty. As to that claim, the judgment is reversed. OPINION OF JANUARY 21, 2000, WITHDRAWN; OPINION SUBSTITUTED; AFFIRMED IN PART; REVERSED IN PART; APPLICATIONS FOR REHEARING OVERRULED. HOUSTON, COOK, LYONS, JOHNSTONE, and ENGLAND, JJ., concur. HOOPER, C.J., concurs in part and dissents in part. SEE, J., concurs in part; concurs in the result in part; and dissents in part.