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Lippincott v. Estate of Coles

2005 WL 3454765 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTS; ESCROW AGENTS—Where there are two escrow agents, one appointed by a seller and one appointed by a buyer, each individual escrow agent serves the party who appointed her or him, and not the other party.

In connection with a property sale, an escrow agreement was created to receive and disburse proceeds of the sale of subdivided lots as and when the sales took place. There were two escrow agents. One was an attorney appointed by the seller and the other was an attorney appointed by the buyer. At first, monies were disbursed from the title company’s trust account to the escrow agent’s trust account before payment was made to the parties. At some point, according to one of the two escrow agents, it was decided that this was impractical and it was further decided that “the monies would be disbursed directly through the title office for maintaining closings. However, the approval of [the two escrow agents] was still required prior to the disbursement of any money.” After a fair number of transactions took place, the seller believed it was not receiving the proper amount of money and filed a legal malpractice claim against both escrow agents. The escrow agent appointed by the buyer argued that there was no attorney-client relationship between him and the seller, claiming that he never met the seller and that his duties and responsibilities as escrow agent were to his client, the buyer, whereas the other escrow agent’s duties and responsibilities were to the seller. The Court examined prior case law that had held an escrow agent liable under similar circumstances but distinguished the instant matter from earlier case law. Under earlier cases, the escrow agent served for both parties. Here, each escrow agent served as such for only one of the parties. Consequently, the Court found that the buyers had no basis on which to maintain their malpractice action against the escrow agent who was appointed by the buyer. Also according to the Court, the seller “failed to show a prima facie of fraud or misrepresentation against [the escrow agent appointed by the seller] because [that escrow agent] owed no fiduciary duty to [it, the seller], and [the seller] failed to provide evidence suggesting that [the buyer’s escrow agent] withheld information or that any of his actions resulted in actual damage to [it].”

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