Fraud Claim Revived Against Title Company Over Forged Real Estate Conveyance

While living abroad in the United Arab Emirates, Barbara Chesnut was blocked from traveling back to the United States during the pandemic. Upon her return to Cottontown, Tennessee, in 2021, she discovered strangers occupying the home she had bought out and inherited following her late brother’s death. During her extended absence, a former occupant who had once stayed at the residence orchestrated a title scheme by fabricating the persona of "Dorothy Chestnut," claiming to be the deceased brother's sole legal heir.

Using fraudulent affidavits of heirship and a falsified driving licence, the impostor sold the house to an investment firm, Ultra Home Solutions, LLC. The closing was conducted by Rudy Title and Escrow, LLC, which accepted power-of-attorney authority to finalize the transfer. The property was subsequently flipped multiple times. Although the perpetrator ultimately pleaded guilty to criminal property theft, Chesnut initiated civil proceedings against Rudy Title in the Sumner County Circuit Court, seeking over $1 million in damages for negligence and fraud. After the circuit court dismissed her entire action, Chesnut appealed. The Tennessee Court of Appeals has now officially revived her fraud claim while upholding the dismissal of the negligence action.

Legal Topic

Area of Law: Real Estate Law / Tort Law

Sub-topic: Deed Fraud / Title Company Liability / Intentional Torts

Core Legal Issue

The dispute centers on two legal threshold questions: first, whether a closing and escrow company owes an independent common law duty of care in tort to a true property owner who is a contractual stranger to the closing transaction; and second, whether a trial court commits procedural error when it dismisses a lawsuit in its entirety on summary judgment without the moving party specifically requesting or demonstrating an absence of material fact regarding an pleaded claim of intentional fraud.

What Did the Court / Authority Decide?

The Tennessee Court of Appeals affirmed the dismissal of Chesnut's negligence claim on procedural and substantive grounds, determining that Chesnut failed to properly raise and preserve viable arguments establishing that Rudy Title owed her an actionable legal duty of care.

However, the appellate court reversed the circuit court's dismissal of her fraud claim. The court held that Rudy Title's dispositive motion had exclusively attacked the negligence count and completely omitted any substantive challenge or legal basis to dispose of the intentional fraud allegation. Consequently, the appellate bench ruled that the trial court erred in dismissing the entire lawsuit sua sponte, formally reinstating the fraud claim and remanding the matter to the Sumner County Circuit Court for further proceedings.

Key Legal Points

• A title and closing company acts on behalf of the transaction parties named in the agreement, making it legally difficult for non-client third parties to enforce a common law duty of care under negligence.

• Procedural preservation rules bar appellants from introducing novel theories of legal duty or reliance on appeal that were not presented before the trial court.

• Trial courts exceed their authority when granting summary dismissal over cause-of-action counts that were not challenged or raised in the moving party's dispositive pleadings.

• While negligence claims frequently fail absent privity or direct reliance, allegations of active complicity, bad faith, or intentional fraud remain viable if left legally unrebutted on the record.

Relevant Law

• Tennessee Rules of Civil Procedure, Rule 56 (Summary Judgment standard and notice requirements)

• Common Law Tort Principles of Fraud and Deceit

• Doctrine of Negligence (Requirement of a legally cognizable duty of care between closing agent and non-party owner)

• Real Property Recording and Title Standards (Sumner County, Tennessee)

Arguments of the Parties

The plaintiff, Barbara Chesnut, argued that Rudy Title failed to conduct rudimentary due diligence in examining local probate court records from her late brother’s intestate estate, which would have instantly exposed that the purported seller was an impostor. She contended that title and escrow agencies must not act as a conduit for fraudulent conveyances and should answer in both negligence and fraud.

The defendant, Rudy Title and Escrow, LLC, contended that it acted solely as closing attorney and escrow agent for the purchaser and owed no actionable legal duty of care to Chesnut. The company argued that Chesnut had no contractual privity with the firm, had not engaged its services, and had not shown that she acted or refrained from acting in reliance upon any communication or title commitment it issued.

Why Does It Matter?

Deed theft and title piracy schemes increasingly exploit unoccupied properties, elderly homeowners, and absentee owners living overseas. Because title companies traditionally operate under strict contractual relationships with buyers or lenders, true property owners defrauded of their real estate face steep hurdles attempting to recover financial losses through ordinary negligence.

This ruling highlights an important litigation dynamic: even when title agencies insulate themselves against negligence claims through the lack of third-party duty, they remain vulnerable to intentional tort actions. Where an agency's filings overlook separately pleaded allegations of fraudulent conduct, courts will not allow summary dismissals to erase accountability, forcing title facilitators to defend their role and diligence in disputed transactions.

Legal Takeaway

A third party cannot easily sue an escrow or title firm for negligence without privity or established reliance, but claims rooted in intentional fraud will survive if unchallenged. Moreover, trial courts cannot dismiss a complaint wholesale when the defendant fails to move for summary judgment on every pleaded cause of action.

Sources

Primary Source: Tennessee Court of Appeals Judgment / Order (Sumner County Circuit Court remand, Chesnut v. Rudy Title and Escrow, LLC et al.)

Additional Sources: Circuit Court for Sumner County Records; Tennessee Public Deed & Judicial Filings