Monday, April 1, 2013

Georgia Supremes: Legal Malpractice Claim Against R/E Closing Attorney May Be Assignable To Title Insurer Where Lawyer's Employee Snatched $500K+ In Escrow Cash & Closes Bank Account

From US Law:

  • In 2007, Appellant Derick Villanueva acted as the closing attorney for a mortgage-refinance transaction in which Homecomings Financial, LLC served as the lender supplying funds to pay off earlier mortgages on the secured property.

    Appellee First American Title Insurance Company issued title insurance on the transaction. Pursuant to Villanueva’s instructions, Homecomings wired funds into a specified escrow account.

    However, the funds were not used to pay off the earlier mortgages; instead, the funds were withdrawn and the account closed by a person not a lawyer.(1)

    First American paid off the earlier mortgages(2) and, pursuant to its closing protection letter to Homecomings, became "subrogated to all rights and remedies [Homecomings] would have had against any person or property…."

    First American then filed this lawsuit against appellants, the estate of another attorney, the escrow account, the non-lawyer who withdrew the funds from the escrow account, and others, seeking damages for legal malpractice and breach of a contract with Homecomings.

    The trial court denied summary judgment to appellants. The issue before the Supreme Court was whether a legal malpractice claims were not per se unassignable.

    After studying the issue, the Court agreed with the appellate court that legal malpractice claims are not per se unassignable.
Source: Opinion Summary - Villanueva v. First American Title Ins. Co.

For the ruling, see Villanueva v. First American Title Ins. Co., S12G0484 (March 18, 2013).

(1) The non-lawyer, one Neal Allen, who had been made a signatory on the escrow account by Villanueva's law partner George Moss, withdrew more than $500,000. At the time, close to $800,000 was still owed on the homeowner-client's existing mortgages that were being refinanced. Shortly before the withdrawal, Allen had made some payments on the homeowner-client's existing mortgages in an apparent attempt to hide the shortage in the escrow account. See Villanueva v. First American Title Ins. Co., 721 SE 2d 150 (Ga. App. 2011).

(2) Ibid.

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