Texas Escrow Liability: Mutual Assent, Foreseeable Harm, and the Difference Between an Opinion and a Promise

1. Introduction

The dispute concerned a $3 million earnest-money payment that allegedly reached an escrow agent and was almost immediately transferred to one participant in a real-estate venture, rather than retained for the transaction. The Fifth Circuit affirmed dismissal of the funding participant’s claims because the complaint did not adequately connect the alleged misconduct to the specific elements of contractual liability, negligence, breach of fiduciary duty, or promissory estoppel.

The plaintiff, 82 Glenwood Avenue, L.L.C. (“82 Glenwood”), argued that emails and the subsequent transfer of money established an escrow arrangement requiring the defendants to hold its funds and return them to it. The remaining defendants were escrow agent Evan Lipp, Kane Title, L.L.C., and David Kane. The court concluded that the communications did not establish agreement to the particular return obligation asserted, that the alleged theft by a transaction participant was not reasonably foreseeable on the pleaded facts, and that Lipp’s interpretation of a draft contract was not an enforceable promise.

The decision’s central lesson is that an alleged escrow loss does not itself establish liability. A claimant must plead the particular agreement, promise, or foreseeable injury supporting each asserted cause of action.

2. Background and Procedural History

The transaction and the funding structure

BHL Capital LLC, owned by Nolan Schutze, agreed to purchase Austin property from WC 6th & Rio Grande LP. The purchase agreement required a $3 million earnest-money deposit. Because BHL Capital lacked sufficient funds, it collaborated with other investors. Their arrangements ultimately produced 82 Glenwood and another entity, 601 Rio LLC, whose members were 82 Glenwood and BHL Capital. BHL Capital assigned its purchaser’s rights to 601 Rio LLC.

82 Glenwood alleged that it supplied the required $3 million on behalf of 601 Rio LLC by wiring the money to Lipp in his capacity as an escrow agent employed by Kane Title.

The emails preceding payment

Before the transfer, Schutze introduced Jake and Austin Deraaff and Evan Mizrahi to Lipp as his “partners on the deal.” Their communications discussed a draft contract contemplating replacement of the initial $3 million with another buyer’s down payment after a 45-day feasibility period.

Mizrahi asked whether “we” would receive the $3 million back on day 46, assuming the buyer did not cancel. Lipp explained that an escrow agent acts as a neutral third party and follows contractual instructions rather than interpreting the contract. He then expressed his “opinion” that the money would be released when the feasibility period ended or the contract was canceled.

These exchanges were critical because they did not identify 82 Glenwood or disclose that Mizrahi was acting as its agent. Instead, they presented the participants collectively as Schutze’s partners.

The alleged diversion and ensuing litigation

82 Glenwood wired the funds on February 14, 2023. According to the complaint, within thirty minutes Schutze privately requested a refund to himself. Kane Title allegedly transferred the money to Schutze almost immediately, retaining a 2.5% fee of $75,000.

Approximately 45 days later, 82 Glenwood requested repayment. Lipp responded that he would not release funds until he understood the purchasing entity’s membership and signing authority. That response allegedly implied that the money remained available, although it had already been transferred.

82 Glenwood sued several defendants and later settled its breach-of-contract and fraud claims against BHL Capital and Schutze. The district court dismissed the remaining claims against Lipp, Kane, and Kane Title under Federal Rule of Civil Procedure 12(b)(6). The Fifth Circuit affirmed.

3. Summary of the Opinion

The appellate court reviewed the dismissal de novo, accepting the factual allegations in the Third Amended Complaint as true. Texas substantive law governed the diversity action.

The court did not adjudicate a fraud claim against the remaining defendants. Its discussion addressed the four theories identified above.

4. Legal Reasoning

A. Contract formation required agreement to the obligation actually asserted

Texas law requires the same formation elements for express contracts and contracts implied from conduct: offer, acceptance, mutual assent to essential terms, consent, and execution and delivery with an intention to create a binding agreement. The court resolved the contract claim on mutual assent.

The decisive distinction was between an apparent understanding that money would be handled in connection with a transaction and an agreement that Lipp would return that money only to 82 Glenwood. The court found the latter undertaking inadequately pleaded.

Several features supported that conclusion:

• The asserted contracting party was unidentified. The emails did not name 82 Glenwood or otherwise demonstrate that Lipp intended to contract with it.
• Agency was not communicated. Although Mizrahi allegedly represented 82 Glenwood, the communications presented him as Schutze’s partner, not as the representative of a separate funding entity.
• The repayment request was collective. Mizrahi’s reference to “we” appeared to encompass the participants introduced as partners, including Schutze.
• The operative documentation remained unclear. The complaint did not explain what company documents Lipp actually received or whether the draft contracts identified 82 Glenwood.
• Receipt of money did not supply the missing term. Neither the escrow receipt nor the alleged wire established agreement to an exclusive repayment obligation.

The court added that even a wire identifying 82 Glenwood as the account holder would not, under these circumstances, establish assent to repay only that entity. Identification of the source of money is different from agreement about who may authorize or receive its return.

This is not a general holding that electronic communications cannot form escrow contracts or that an undisclosed principal can never enforce an agreement. The narrower conclusion was that these allegations did not establish the specific agreement on which 82 Glenwood sued.

The contract claim against Kane Title was derivative of the claim against Lipp. Because the pleaded conduct of its agent did not establish the asserted contract, that claim failed against the company as well.

B. The tort claims failed on foreseeability, not a definitive finding that no duty existed

Both ordinary negligence and breach of fiduciary duty required damages proximately caused by breach of a duty. Proximate cause includes two components: cause in fact and foreseeability. The court focused on foreseeability.

The inquiry was whether an ordinarily intelligent person in the defendants’ position should have anticipated that refunding money to Schutze would result in its theft from 82 Glenwood or someone similarly situated. The court considered the information allegedly available to Lipp, rather than reasoning backward from the eventual loss.

Lipp and Schutze had worked together before, and the complaint alleged no prior dealings that should have made Lipp suspicious. The communications described Schutze and the other participants as partners pursuing the transaction collectively. On that record, the court held that a reasonable escrow agent would not have anticipated that one apparent partner would steal funds supplied by another.

The district court had observed that the complaint did not allege the remaining defendants’ participation in Schutze’s deception. The Fifth Circuit agreed with the conclusion that foreseeability was missing. That reasoning should not be converted into a universal requirement that a negligence plaintiff prove the defendant participated in fraud. The governing requirement remained foreseeable harm; the absence of involvement or warning signs mattered in assessing that requirement here.

Importantly, the court did not need to determine the full scope of any escrow or fiduciary duty, or whether the immediate transfer breached such a duty. Failure to plead proximate cause independently defeated both claims.

C. An interpretation of a draft contract was not a promise

Promissory estoppel requires a promise, foreseeable reliance by the promisee, and substantial detrimental reliance. 82 Glenwood characterized Lipp’s email as a promise to hold its money and return it after the feasibility period or cancellation.

The court instead read the statement in context. Schutze and Mizrahi had asked Lipp to confirm their interpretation of draft contractual language. Lipp expressly distinguished his neutral administrative role from contract interpretation, then qualified his answer as an “opinion.” His statement described what he thought the draft provided; it did not independently undertake to hold and return 82 Glenwood’s money.

The opinion supplied an alternative ground as well. Even if the statement could be treated as a promise, foreseeable reliance was insufficiently pleaded because the discussions concerned a draft that could still be revised.

The distinction is contextual, not merely verbal. The decision does not establish that inserting “in my opinion” always prevents a statement from being a promise. Here, that qualification reinforced the subject matter, surrounding requests, and provisional nature of the document being discussed.

D. The pleading posture limits the decision’s reach

The allegations of an immediate payout, a substantial retained fee, and a later response implying that funds remained undistributed are troubling. Nevertheless, the court held that they did not cure the identified deficiencies in assent, foreseeability, and promise.

Because this was a dismissal on the pleadings, those events were not findings after trial. Nor does affirmance amount to approval of the defendants’ escrow practices. The decision establishes that the particular complaint failed to state the asserted claims under the legal elements the court applied.

5. Precedents Cited and Their Influence

A. Review of dismissal and governing law

Sonnier v. State Farm Mut. Auto. Ins. Co., 509 F.3d 673, 675 (5th Cir. 2007)

The court used this decision both for accepting the complaint’s factual allegations as true and for reviewing a Rule 12(b)(6) dismissal de novo. Its role was procedural: the panel evaluated the legal sufficiency of the alleged facts rather than weighing evidence or resolving credibility.

In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007)

Cited through Sonnier v. State Farm Mut. Auto. Ins. Co., this authority supported the de novo review standard. It reinforced that the appellate court independently assessed whether dismissal was legally justified.

Primrose Operating Co. v. Nat'l Am. Ins. Co., 382 F.3d 546, 552 n.4 (5th Cir. 2004)

This decision supported application of Texas substantive law in the diversity action. It supplied the framework within which the court analyzed the state-law causes of action, while federal procedural rules governed the dismissal motion.

B. Formation of express and implied contracts

Plotkin v. Joekel, 304 S.W.3d 455, 476–77 (Tex. App.—Houston [1st Dist.] 2009, pet. denied)

This case established that express and implied contracts require identical formation elements. The court also relied on it when assessing whether conduct and surrounding circumstances showed consent to be bound. It prevented 82 Glenwood from avoiding the mutual-assent requirement merely by characterizing the arrangement as implied from dealings.

Univ. Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 710 (Tex. App.—San Antonio 1989, no writ)

Quoted through Plotkin v. Joekel, this authority supplied the underlying proposition that express and implied contracts share the same elements. Its contribution was doctrinal rather than a separate factual analogy to escrow practices.

USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479, 501 n.21 (Tex. 2018)

The court drew its five-part contract-formation test from this Texas Supreme Court decision. That test allowed the panel to identify mutual assent as the decisive missing element without resolving every other aspect of formation or performance.

Oncor Elec. Delivery Co. NTU, LLC v. Wilbarger Cnty. Appraisal Dist., 691 S.W.3d 890, 901 n.7 (Tex. 2024)

This decision emphasized that both express and implied-in-fact contracts require a meeting of the minds evidenced by conduct and dealings, with consent to be bound at their core. It directly informed the court’s conclusion that participation in transaction communications was not enough to establish the specific repayment commitment alleged.

Haws & Garrett Gen. Contractors, Inc. v. Gorbett Bros. Welding Co., 480 S.W.2d 607, 609 (Tex. 1972)

Quoted through Oncor Elec. Delivery Co. NTU, LLC v. Wilbarger Cnty. Appraisal Dist., this case supplied the foundational formulation linking a meeting of the minds to conduct and course of dealing. The reference confirmed that implied contractual obligations still depend on actual manifestations of assent.

Hou. Med. Testing Servs., Inc. v. Mintzer, 417 S.W.3d 691, 698 (Tex. App.—Houston [14th Dist.] 2013, no pet.)

The panel cited this authority in examining the absence of express terms requiring payment exclusively to 82 Glenwood. It supported the distinction between a general transactional understanding and agreement to the material obligation being enforced.

Effel v. McGarry, 339 S.W.3d 789, 792 (Tex. App.—Dallas 2011, pet. denied)

This case supplied the formulation that parties must assent to the same thing, in the same sense, at the same time, encompassing the intended terms. It supported the conclusion that even identification of 82 Glenwood as the wire’s source would not establish agreement to its asserted exclusive repayment right.

Finley v. Hundley, 252 S.W.2d 958, 962 (Tex. App.—Dallas 1952, no writ)

Cited within the quotation from Effel v. McGarry, this older authority underpinned the same complete-assent principle. The panel did not independently compare its facts with the escrow dispute.

C. Corporate action through agents

Reid Road Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846, 853 (2011)

This decision supported the proposition that an organization acts through its agents. It explained why Kane Title’s alleged contractual liability was evaluated through Lipp’s conduct.

360-Irvine, LLC v. Tin Star Dev., LLC, No. 05-14-00412-CV, 2015 WL 3958509, at *5 (Tex. App.—Dallas June 30, 2015, no pet.) (unpublished)

This authority supplied the corresponding proposition specifically for limited liability companies: they act through agents and authorized representatives. Together, these cases supported dismissal of the derivative contract theory against Kane Title once formation through Lipp was inadequately pleaded.

D. Proximate cause and foreseeability

Bos v. Smith, 556 S.W.3d 293, 303 (Tex. 2018)

This was the central tort authority. It established the proximate-cause requirement for negligence and fiduciary-duty claims, identified foreseeability and cause in fact as its components, and directed attention to whether harm to the particular plaintiff or a similarly situated person could reasonably be anticipated. These principles drove dismissal of both tort claims.

Taylor v. Louis, 349 S.W.3d 729, 737 (Tex. App.—Houston [14th Dist.] 2011, no pet.)

Quoted through Bos v. Smith, this decision explained that foreseeability ordinarily considers awareness of prior similar third-party conduct. It made the absence of allegations about suspicious prior dealings between Lipp and Schutze relevant to the court’s analysis, without making prior misconduct an invariably necessary allegation in every negligence case.

Doe v. Boys Clubs of Greater Dall., Inc., 907 S.W.2d 472, 478 (Tex. 1995)

Also quoted through Bos v. Smith, this decision cautioned against using hindsight to construct an extraordinary chain of events connecting conduct to injury. The panel applied that principle in rejecting the proposition that Schutze’s eventual misappropriation necessarily made the loss foreseeable when he requested repayment.

E. Promissory estoppel

English v. Fischer, 660 S.W.2d 521, 524 (Tex. 1983)

This Texas Supreme Court decision supplied the three elements of promissory estoppel: a promise, foreseeable reliance, and substantial detrimental reliance. The court found the first element missing and independently identified a deficiency in the second. It therefore did not need to resolve whether 82 Glenwood’s transfer otherwise constituted sufficient detrimental reliance.

6. Potential Impact and Practical Significance

More precise pleading in escrow disputes

The opinion illustrates why plaintiffs should distinguish the existence of an escrow relationship from the particular instructions allegedly violated. Relevant allegations may include the identity of the depositor and beneficiary, the agent’s knowledge of those identities, the agreed release conditions, and who possessed authority to direct repayment.

These are practical lessons from the reasoning, not a new mandatory checklist announced by the court.

Clear documentation in multiparty ventures

The decision highlights the risks of referring informally to several people and entities as “partners.” A funding entity, purchasing entity, individual participant, and authorized representative may occupy very different legal positions. Written escrow instructions identifying those roles can reduce uncertainty about entitlement and authority.

Foreseeability remains fact-sensitive

Future plaintiffs alleging loss through a third party’s misconduct will need facts explaining why the defendant should have anticipated that loss. Known competing claims, suspicious instructions, contradictory authority documents, or prior misconduct might distinguish another case, but this opinion did not decide their effect.

Conversely, the decision should not be read as blanket immunity for escrow agents who release money to someone described as a partner. Its reasoning depended on the allegations and the absence of pleaded warning signs.

Preliminary advice is not necessarily an undertaking

The promissory-estoppel analysis may influence disputes involving transactional emails and preliminary assurances. Courts will examine whether a speaker actually committed to act, rather than treating every favorable interpretation or expectation as a promise.

Limited precedential force

Because the opinion was not designated for publication, its principal significance is persuasive and illustrative, subject to the circuit’s rules governing unpublished decisions. The cited Texas authorities remain the foundation for the substantive principles applied.

7. Complex Concepts Simplified

Rule 12(b)(6) dismissal

A determination that the complaint does not adequately state a legal claim, even accepting its factual allegations as true. It is not a trial verdict about what actually happened.

De novo review

The appellate court independently examines the legal question without deferring to the district court’s legal conclusion.

Mutual assent

Agreement, shown through words or conduct, to the same essential contractual terms. Supplying money does not automatically establish every condition the supplier expected.

Implied-in-fact contract

A genuine agreement inferred from conduct rather than fully expressed in words. It still requires mutual assent.

Escrow

An arrangement in which a neutral holder receives money or property and releases it under specified conditions. The relevant instructions determine the holder’s undertaking.

Fiduciary duty

A legally recognized obligation to act with loyalty or care within a particular relationship. Even when such a duty is asserted, a damages claim must establish the required causal connection to the loss.

Proximate cause

A legal connection between conduct and injury requiring both actual causation and reasonable foreseeability. Merely showing that conduct preceded a loss is insufficient.

Promissory estoppel

A doctrine that may protect detrimental reliance on a promise even without an enforceable contract. It cannot substitute for the absence of an actual promise.

8. Conclusion

The Fifth Circuit affirmed because 82 Glenwood’s complaint failed at distinct elements of each theory: mutual assent for contract, foreseeable harm for negligence and fiduciary duty, and a genuine promise and foreseeable reliance for promissory estoppel.

The opinion’s broader significance is one of precision. In multiparty escrow transactions, the source of funds, the identity of the contracting party, authority to direct payment, and entitlement to repayment must not be treated as interchangeable. Although unpublished and fact-specific, the decision offers a useful illustration of how those distinctions can determine whether a substantial alleged loss supports a legally sufficient claim.