Guaranty Title Collapse: Ramifications ripple through business community

Landlords, development companies and builders claim the Nixa-based title company stiffed them after an abrupt closing June 19 of nine regional offices, primarily in Greene, Christian and Lawrence counties.

Additionally, the title company’s Virginia-based underwriter, LandAmerica Financial Group, expects to pay out substantial sums to former Guaranty Title customers hoping to recover money they thought was being held in escrow.

A senior auditor for LandAmerica has found at least $4.5 million missing from Guaranty Title’s escrow accounts, according to a lawsuit pending in Christian County Circuit Court. The now-defunct title company had about 50 accounts at roughly 20 area banks, court records show.

The ongoing audit has uncovered “dubious accounting practices” that include escrow shortages, checks written without sufficient funds and insufficient funds to operate the business, court records show.

The Missouri Department of Insurance also has opened an investigation into the Guaranty Title debacle.

“Real estate agents, contractors or builders and financial institutions can all – in some way – be negatively impacted by this agency’s failure,” said department spokeswoman Emily Kampeter. “It’s hard to know the breadth and depth of all the problems until we have the audit from the underwriter and the (results from) continued investigations into these problems.”

One case

Guaranty Title was handling numerous transactions involving real estate in Branson Hills, a mixed-use development on 1,200 acres north of Branson that boasts 600 new condominiums and a $20 million Payne Stewart Tribute golf course.

Branson Hills Development Co. primarily works with a title company in Branson but started doing business with Guaranty Title – which had a Branson office – about a year ago to manage “an abundance” of real estate closings, said Chief Financial Officer Barry Schwartz.

In that time, Branson Hills Development sold property to buyers who made down payments to Guaranty Title that were supposed to be held in escrow. But the money has been inaccessible since Guaranty Title closed, and the development company has filed a lawsuit in hopes of recovering its losses.

Meanwhile, Schwartz said his company has offered buyers credit for their deposits in exchange for the rights to collect on those deposits.

“We’re assuming the risk on their deposits … so that if that money never comes in, we’ll complete the transaction with that customer as if that money was there,” he said. “It’s a risk we wouldn’t want to take, but we want to make sure (the customers) are taken care of.”

In addition to the deposit dilemma, Branson Hills Development has been forced to reroute several scheduled closings to other title companies, but Schwartz said many real estate transactions remain in limbo. He declined to say exactly how many were tied up.

Landlords in lurch

On a separate but similarly frustrating front, property management companies that were renting office space to Guaranty Title have lost income.

J.T. Brown Realty Co. was leasing about 1,200 square feet of space in Nixa’s Fountain Plaza shopping center, 202 N. Massey Blvd., to Guaranty Title for $800 a month, owner J.T. Brown said. But Guaranty Title failed to pay rent in June and July, he said.

Brown said Guaranty Title’s owners – Kathy Allen, Rick Burton and Stephanie Gray – recently signed a three-year lease, but he hasn’t been able to reach them since the company went under.

“We want possession so we can get it leased again,” Brown said.

Larry Lipscomb of Jim Hutcheson Realtors is in the same boat.

Earlier this summer, Lipscomb began renting a 1,600-square-foot office he owns on the square in downtown Ozark to Guaranty Title for $995 a month. But after just two months, the company stopped making payments, voiding a two-year lease agreement signed in December. Lipscomb said the title company never had the utilities transferred.

Builders hit

The same day Springfield home builder Jeff Campbell walked into Guaranty Title’s Nixa office for a $6,000 draw on a construction loan, Guaranty Title employees were given trash bags and told to clean out their belongings within 20 minutes.

Campbell, who builds homes on Springfield’s north side in Crown Meadows subdivision, said he was told that a check waiting for him at the office wouldn’t go through due to insufficient funds.

“They got me for six grand, and I’m lucky it was only six grand,” he said. “Bottom line is they’re going to make me come up short on two of my houses.”

Campbell said he’s now short on his construction loan, because he was forced to borrow more money for a lumber package that never got paid. A closing for one of his homes also was delayed because he couldn’t access paperwork on file with Guaranty Title; he’s since arranged for Fidelity Title Agency to handle the transaction.

Campbell is optimistic the money he’s owed will be covered by Guaranty Title’s underwriter, but Fidelity Manager Bob Clinkenbeard said he’s concerned some builders and their subcontractors may have their claims rejected.

“I don’t know who’s going to file a title insurance claim and how that’s going to be covered,” he said. “I really think that if a builder goes in and says, ‘I want to file a claim,’ they’re going to say, ‘Where’s your policy?’ I think they’re going to have to end up suing them in civil court to get their money.”

Smaller specialty contractors – sheet rockers, painters and the like – who operate on shoestring budgets may be the “real losers in this deal,” Clinkenbeard said, adding that those businesses won’t be able to justify costs associated with litigation.

“Those are the guys to me that are really getting burned in this thing,” he said.

LandAmerica has said its liability will be determined by different documents, such as a title insurance commitment, title insurance policy or closing protection letter.

The company is now examining files to determine which companies have legitimate claims.[[In-content Ad]]