Gurley v. Bank of Huntsville

In Gurley v. Bank of Huntsville, 349 So. 2d 43 (Ala. 1977). the Court 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.) 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.