Thursday, Nov. 29, 2001 | 10:37 a.m.
CARSON CITY -- In a victory for consumers, the Nevada Supreme Court has ruled that escrow agents have a duty to disclose fraud if they are aware of it in a property transaction.
The court, in modifying a ruling issued in December 2000, added that escrow agents do not have an obligation to investigate potential sales to discover fraud.
The case involved Mark Properties Inc. owned by Mark Snop and Mark Raiter, real estate investors from Israel who sought to invest in properties in Las Vegas.
They entered into two agreements with Las Vegas real estate developer Sam Ventura and his associate Michael Bash in the 1990s to buy property, court records show. In both agreements, the Israeli investors learned later there had been a double escrow deal that profited Bash.
Bash, through one of his companies, had purchased the land earlier and then sold it at a profit to the four-member partnership. Snop and Raiter said they did not know about that deal. Bash used the profits as his share for the purchase of the property by the four members.
Both transactions were handled by National Title Co. The Israeli investors sued the title company for negligence and breach of fiduciary duty, saying it had an obligation to disclose the double escrow. National Title won a pretrial summary judgment in District Court in Las Vegas that it had no duty to disclose the potential fraud.
In a decision Monday, the Supreme Court said National Title, as an escrow agent, "has a duty to disclose fraud committed by another party to the escrow if the facts actually known to the escrow agent present substantial evidence of fraud."
The court said it also found "that an escrow agent has no duty to investigate circumstances surrounding a particular sale in order to discover fraud."
The case was sent back to District Court for a trial to determine if officials of National Title knew about the fraud and failed to disclose it.
The court said, "We cannot condone an escrow agent's silence when the agent is aware of the facts indicating that fraud is being perpetrated on a party with whom the agent has an escrow relationship.
"When the escrow agent performs the escrow with such an awareness, the agent becomes, in effect, a participant in the fraud, and should, therefore, be liable to the defrauded party if the fraud is not disclosed," the court said.
But the court affirmed the District Court's ruling in favor of Lawyers' Title of Nevada, which was also sued by Snop and Raiter. It said Snop and Raiter were not parties to a third-property transaction that was conducted under similar circumstances.
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