Opinion ID: 158728
Heading Depth: 2
Heading Rank: 4

Heading: The Homeowners' State Law Claims: Fraud and Breach of Fiduciary Duty

Text: 68 Missouri law also applies to the homeowners' state law claims. 13 Therefore, the legal standards set forth above regarding fraud and breach of fiduciary duty also apply to the homeowners' claims. BOMC cites various acts by the Title Companies that it claims constitute fraud. BOMC claims the Title Companies knew the homeowners thought title insurance would take care of any problems regarding payoff of their prior mortgages. Further, BOMC claims the homeowners did not realize the title insurance was for the lender's protection, not their own. BOMC contends the closing affidavits provided by the Title Companies to LMS implied that title insurance was being issued, without any qualifications or exceptions. Appellant's Br. at 28. 69 Like BOMC's direct claim, the homeowners' claim for fraud does not include a representation by the Title Companies. The closing affidavits on which BOMC relies were basically blank forms provided by the Title Companies, seeking information from the borrowers. Nowhere on those affidavits did the Title Companies represent they were issuing title insurance policies to protect the borrowers or the lender. The homeowners made representations in the closing affidavits, not the Title Companies. No Title Company representatives were ever present at the closings of the loans at issue. Therefore, the Title Companies could not have created any false impressions for the homeowners to rely on. Any false impressions would have been created by LMS's representatives. 70 In addition, the HUD-1 forms for the loans at issue reflected that payment for title insurance was for the lender's coverage; the owner's coverage line was blank. Appellee's Br. at 12. Further, LMS provided a HUD booklet entitled, Your Guide to Settlement Costs to the homeowners. Id. LMS provided these booklets even though RESPA did not require it in refinancing situations. The information provided in this booklet advised the homeowners that a title insurance policy issued only to the lender would not protect them. Id. It further advised that if the homeowners wanted to protect themselves, they would need to purchase an owner's policy. The Title Companies made no representations to the homeowners. The representations LMS made, via the settlement costs booklet, warned the homeowners that a lender's policy would not protect them. Therefore, any beliefs the homeowners may have had with regard to a lender's policy protecting their own interests were unreasonable and do not form a basis for a fraud claim against the Title Companies. 71 In addition, insurance agents in Missouri have no general duty to advise potential customers of optional coverages that may be available. Farmers Ins. Co. v. McCarthy, 871 S.W.2d 82, 86 (Mo. Ct. App. 1994). Thus, the Title Companies had no obligation to inform the homeowners about a title insurance policy that would protect their interests. 72 BOMC has failed to establish that a fiduciary relationship existed between the Title Companies and the homeowners. The Title Companies never issued title insurance policies to the homeowners. The record does not reflect any attempt by any homeowner to purchase title insurance policies to protect the homeowner's interests. The Title Companies only presented commitments to issue title insurance, which indicated title insurance would be available, provided the prior mortgages were paid in full. The Title Companies presented these commitments to LMS, not the homeowners. Further, any title insurance policy that would have been issued would have been to BOMC to protect its interests, not the homeowners. As noted above, the Title Companies did not issue title insurance policies to anyone, because the prior mortgages on the homeowners' homes were not paid. 73 Like BOMC, the homeowners have no basis for a breach of fiduciary duty claim because no fiduciary relationship existed. Any trust a homeowner placed in the Title Companies was based on something other than Title Company representations. Under Missouri law, a [f]iduciary duty is not created by a unilateral decision to repose trust and confidence; it derives from the conduct or undertaking of the purported fiduciary which is recognized by the law as justifying such reliance. Farmers Ins. Co., 871 S.W.2d at 87. Here, the Title Companies, the alleged fiduciaries, did not conduct themselves in a manner that would justify the homeowners' alleged reliance. 74 BOMC further asserts that the Title Companies voluntarily assumed a fiduciary relationship with the homeowners. It cites no authority for this proposition. More compelling, the record belies the assertion. As we have noted previously, the Title Companies had a very limited role in these transactions which simply does not lend itself to BOMC's claims. 75 Finally, as another basis for its claim for breach of fiduciary duty, BOMC argues the Title Companies made LMS their agent to pay off the prior mortgages and are liable for LMS's failure to do so. With this argument, BOMC focuses on the wrong relationship. In order to establish a breach of fiduciary duty to the homeowners, BOMC would have to show an agency relationship existed between the Title Companies and the homeowners, not the Title Companies and LMS, as BOMC has alleged. See A.G. Edwards & Sons, Inc., 978 S.W.2d at 395 (Once an agency relationship has been established, a fiduciary relationship arises as a matter of law.).