Court Opinion

ID: 9629705
Source: CourtListenerOpinion
Date Created: 2023-08-22 09:47:37.559718+00
Date Added: 2024-06-11T09:17:58.262947
License: Public Domain

EUBANK, Judge,
dissenting.
I dissent from that portion of the majority opinion which holds that the evidence established, sufficient to affirm the summary judgment, that the escrow agent had “implied authority” to disburse funds. As to the other issues, I concur with the majority.
The majority opinion makes new escrow law in Arizona. It approves the action of *509an escrow agent who paid $50,000 out of escrow when the escrow instructions did not expressly authorize such payment. The majority affirm the summary judgment and approve of the payment on the basis of “implied instruction” and “implied authority” described by the California Court of Appeals in Gordon v. D & G Escrow Corporation, 48 Cal.App.3d 616, 122 Cal.Rptr. 150 (1975).
I disagree with the majority because clear Arizona precedents, described below, indicate that an escrow agent is not entitled to assume, on the basis of nebulous “implied authority,” that he may disburse funds when the escrow instructions do not expressly authorize that action. Rather, under Arizona law, an escrow agent faced with unclear or ambiguous instructions is required to obtain supplemental instructions before proceeding beyond the written authority of the original instructions. As a result, the minimum that this Court should now hold is that there are genuine issues of fact concerning the agent’s authority, and that the summary judgment was therefore inappropriate to that extent.
In Buffington v. Title Insurance Co. of Minnesota, 26 Ariz.App. 97, 99-100, 546 P.2d 366, 368-9 (1976), Judge Ogg of our Court summarized the duties of an escrow agent in the following language:
The law is well settled in this state that an escrow agent acts in a fiduciary capacity and must conduct the affairs with which he is entrusted with scrupulous honesty, skill and diligence. Tucson Title Ins. Co. v. D’Ascoli, 94 Ariz. 230, 383 P.2d 119 (1963); Higgins v. Kittleson, 1 Ariz.App. 244, 401 P.2d 412 (1965). The escrow agent is a trustee and must act in accordance with the terms of the escrow agreement. Malta v. Phoenix Title & Trust Co., 76 Ariz. 116, 259 P.2d 554 (1953); Higgins v. Kittleson, supra.
The consequences of a wrongful delivery of a deed out of escrow is discussed in Volume 30A, C.J.S. Escrows § 11 at page 1004, which reads:
Where property deposited in escrow is delivered or disposed of without compliance with the conditions of the deposit, the depositor is entitled to recover such damages as he may suffer through the depository’s unwarranted act .
See also 30A C.J.S. Escrows § 12.
Laurentide Leasing Co. v. Schomisch, 382 Mich. 155, 169 N.W.2d 322 (1969); Allen v. Allen Title Co., 77 N.M. 796, 427 P.2d 673 (1967).
The summary judgment for the title company in Buffington was reversed, and this Court ruled that Buffington had stated a cause of action against the title company since an escrow agent who wrongfully forfeits out a buyer’s interest may be liable for damages suffered by the buyer. Our Court also held that valid questions of fact remained, such as whether the title company had breached its fiduciary duty to Buffing-ton, and his damages, if any, precluding summary judgment.
In Union Title Co. v. Burr, 102 Ariz. 421, 423, 432 P.2d 433, 435 (1967), our Supreme Court in upholding the refusal of the title company to pay a commission out of a special fund, said, “Union’s duty as an agent was to comply strictly with the terms of the escrow agreement.” Union’s strict compliance with its instructions precluded liability for its refusal to disburse. See also Malta v. Phoenix Title & Trust Co., 76 Ariz. 116, 259 P.2d 554 (1953). Strict compliance in Burr precluded liability for the title company escrow.
In Tucson Title Insurance Co. v. D’Ascoli, 94 Ariz. 230, 383 P.2d 119 (1963), the escrow instructions allowed the escrow agent to disburse funds for specified purposes for 15 days; thereafter the agent was “to hold for my further instructions.” The agent did not “hold,” and our Supreme Court affirmed the jury verdict for damages against the escrow company stating: “It follows that the jury was justified in finding a violation of the conditions of the escrow agreement and in assessing the damages in *510a sum equal to that deposited in escrow.” Id. at 235, 383 P.2d at 122.
Further, our Court has held that where the escrow terms are ambiguous and the escrow agent has reason to know of the ambiguity, he has a duty to communicate with his principal before disbursing prepayment funds. Gardenhire v. Phoenix Title and Trust Co., 11 Ariz.App. 557, 559, 466 P.2d 776, 778 (1970). Otherwise, liability for damages will result. Id. See also Bre-an v. North Campbell Professional Building, 26 Ariz.App. 381, 548 P.2d 1193 (1976).
Finally, in Miller v. Craig, 27 Ariz.App. 789, 558 P.2d 984 (1976), a case somewhat similar on the facts to this one, we held that the escrow agent deviated from and exceeded his authority under the escrow agreement where he disbursed $5,000 from escrow without obtaining the vendor’s consent where the escrow instructions did not authorize the disbursement.
In light of these cases, it is clear that Arizona law does not allow an escrow agent to imply authority to disburse the funds of his principal. Since the escrow instructions did not provide for disbursal of the $50,000, the escrow agent was obligated to obtain the consent of the appellants before acting. At a minimum, there are genuine issues of fact concerning the escrow agent’s authority and, as to that issue, the summary judgment was improper and I would reverse and remand the case for trial on this issue.
The second and third issues must be resolved in appellee’s favor and, consequently, I concur with the majority opinion regarding these two issues.