Closing Agent Liability - I-20 Corridor Properties, LLC v. Mahony Title Services, LLC.

American Capital, Inc. (ACI) contracted to buy commercial property in East Baton Rouge Parish for $1.75 million. ACI's representative Charles Theus began scouting for someone to flip it to or to finance the deal. He tapped one of his regular sources, Eddie Hakim, who was interested in the property. They made an oral agreement that ACI would convey the property to I-20 Corridor Properties, Inc., an entity controlled by Hakim, the same day it was bought.

Theus hired Mahony Title Services, L.L.C. to serve as closing agent. Theus told Mahony's closer, Denise Strobel, to send a draft HUD-1 to Hakim. When Theus showed up for closing, Strobel told him that Vicki Spurlock, the listing broker, also had a prospective buyer for the property, Bustec, L.L.C. Theus testified that Spurlock applied pressure on him to close with Bustec. A contract was negotiated on the spot, and ACI sold to Bustec that day, for considerably more than Hakim had agreed to pay. Joseph Hakim, Eddie's brother, came to the closing, but was turned away.

Hakim's entity I-20 sued Mahony, claiming that it had breached its "duty of supervision as a closing agent," and that Mahony owed I-20 a fiduciary duty to protect its oral contract rights. Mr. Roux represented the defendant in the multi-million dollar claim. I-20 claimed that Mahony steered the sale toward Bustec because Hakim had decided it did not want title insurance, and "Strobel expressed to Theus her dislike for the Hakims."

The trial court granted summary judgment to Mahony finding that the title company hired to close the sale of property to one buyer was not a fiduciary as to a competing buyer, and the losing buyer may not sue the title company for its alleged damages. In affirming the trial court's ruling, the Second Circuit found that it was Theus and not Mahony who had sold the property to Bustec, and I-20's recovery was against Theus. It also did not buy the argument that Strobel, as the closer, had the power to steer the deal. It noted that Bustec paid several hundred thousand dollars more that Hakim had agreed to pay. If that was not enough, Spurlock also threatened Theus that, if he did not sell to Bustec, the seller would not sell to him and he would forfeit a $50,000 down payment. Theus described this as "an economic gun . . . to my head."

The Second Circuit also found there was no contractual relationship between Mahony and I-20, which was not a party to an escrow. Without an escrow relationship, Mahony also owed no fiduciary duty to I-20. It noted that I-20 was unable to cite any authority suggesting that Mahony had a duty to prevent the sale, or had done wrong even if it had refused to close the sale to I-20.

During the course of the litigation, Mr. Roux issued an offer of judgment to the plaintiffs pursuant to LSA-C.C.P. art. 970 which was rejected. Mr. Roux ultimately recovered approximately $4,000 in costs from the plaintiffs and returned these funds to his client.
I-20 Corridor Properties, LLC v. Mahony Title Services, LLC