Cadillac Lounge, Llc v. McAteer, C.A. No. PC 03-3131 (R.I. Super 9/27/2007)
| Decision Date | 27 September 2007 |
| Docket Number | C.A. No. PC 03-3131 |
| Parties | THE CADILLAC LOUNGE, LLC v. SEAN M. McATEER, ESQUIRE v. E. DAVID GAUDET, and DOMENIC DeFALCO |
| Court | Rhode Island Superior Court |
Before the Court for decision is plaintiff The Cadillac Lounge, LLC's ("The Cadillac Lounge") action against defendant Sean M. McAteer, Esq. ("McAteer"), seeking $20,000 for alleged breach of contract, breach of a fiduciary duty, and conversion. The Court's jurisdiction is pursuant to G.L. 1956 § 8-2-14.
At the heart of this case is a dispute over the legal classification of a certain sum of money transferred from The Cadillac Lounge to McAteer for the purchase of a liquor license held by his client, La Petite France, Inc., a/k/a La Petite France En Villa, Inc. ("La Petite France"). The Cadillac Lounge argues that the $20,000 was transferred to McAteer to be held in escrow until the successful transfer of the liquor license. McAteer counters that the purchase and sale agreement was not an escrow agreement, and that the money was to be available for immediate disbursement.
Three witnesses—Richard Shappy ("Shappy"), Valentino Lombardi, Esq. ("Lombardi"), and McAteer—testified at a two day trial that commenced on May 31 2007. Additionally, by agreement, certain portions of the deposition testimony of E. David Gaudet ("Gaudet") were read into the record.
The background to this case remains undisputed. Both parties agree La Petite France and Shappy d/b/a The Cadillac Lounge1 entered into an agreement ("the Agreement") for the purchase and sale of Le Petite France's Class BX liquor license ("the License") for $20,000. See Exhibit 2. This agreement was executed by Gaudet, as Vice-President of La Petite France, and Shappy on December 11, 1998. It contained the following provision:
On December 11, 1998, Shappy's counsel, Lombardi, personally delivered to McAteer a check in the amount of $20,000 made payable to Sean McAteer, Esq. Lombardi also delivered to McAteer a letter dated December 11, 1998, which read:
"Dear Mr. McAteer:
I have been authorized by my client, The Cadillac Lounge, L.L.C., to turn over to you to be placed in your client's trust account a check in the amount of $20,000 to be maintained as escrow pending the successful liquor license transfer between our respective clients. The Purchase and Sales Agreement executed by our respective clients memorializes their agreement. It is also understood that if for any reason the transfer is not approved by the City of Providence Board of Licenses or on appeal there from the escrow funds shall be returned to my client.
Please sign a copy of this letter acknowledging its receipt and also receipt of the escrow funds. . . ." See Exhibit 3.
The letter is signed by Lombardi, below which appears the signature of McAteer. Id.
On December 11, 1998, McAteer took possession of the money and deposited it into his clients' trust account. That same day, he also issued an $8000 check (Check No. 1692) made payable to David Gaudet out of his clients' trust account. He testified that he could not remember exactly when he saw a copy of the executed Agreement, but that it was after he signed the letter. On January 5, 1999, he issued and then endorsed a check (Check No. 1711) in the amount of $860, with the note "Gaudet Fee" written on the subject line. The next day, on January 6, 1999, McAteer issued several checks from his clients' trust account: Check No. 1712 in the amount of $1,500 to cash; Check No. 1715 in the amount of $40 made payable to the City of Providence; Check No. 1716 in the amount of $9255 made payable to June Gaudet; and Check No. 1717 in the amount of $50 made payable to cash.
A hearing before the Providence Board of Licenses was held on January 6, 1999, at which the transfer of the License from La Petite France to Shappy was approved by a vote of 5-0. On January 14, 1999, an appeal of the approval of the transfer was filed with the Liquor Control Administrator by a third-party objector. See Exhibit 10. The appeal was remanded to the Board of Licenses ("Board") because of an inaccurately drawn radius map. See Exhibit 12. Thereafter, a new application for transfer was filed with the Board, and a hearing on the second application for the license transfer was heard on July 14, 1999. After this hearing, the Board rejected the transfer application by a 5-0 vote, and this decision was upheld by the Department of Business Regulation. See Exhibit 14, 15. Thus, the License was never transferred from La Petite France to The Cadillac Lounge.
On January 5, 2001, The Cadillac Lounge, through its attorney, sent a letter to McAteer seeking return of the escrow funds. See Exhibit 16. When McAteer did not return the money, The Cadillac Lounge filed the instant action.
In all actions tried upon the facts without a jury, the trial justice "sits as trier of fact as well as law," weighing and considering the evidence, determining the credibility of witnesses, and drawing inferences from the evidence presented. Hood v. Kawkins, 478 A.2d 181, 184 (R.I. 1984). "The task of determining credibility of witnesses is peculiarly the function of the trial justice when sitting without a jury." State v. Sparks, 667 A.2d 1250, 1251 (R.I. 1995) (citing Walton v. Baird, 433 A.2d 963, 964 (R.I. 1981)). "It is also the province of the trial justice as a part of the fact-finding process to draw inferences from the testimony of witnesses, and such inferences, if reasonable, are entitled on review to the same weight as his [or her] other factual determinations." Walton, 433 A.2d at 964; see also Rhode Island Hospital Trust National Bank v. Israel, 119 R.I. 298, 306, 377 A.2d 341, 345 (1977). The trial justice need not engage in extensive analysis when making his or her findings of fact; "even brief findings will suffice as long as they address and resolve the controlling factual and legal issues." White v. Le Clerc, 468 A.2d 289, 290 (R.I. 1983).
The Cadillac Lounge's suit against McAteer presents three alternative legal claims: breach of fiduciary duty, breach of contract, and conversion. In order to prevail on the claim of breach of fiduciary duty, the Plaintiff must prove 1) the existence of a fiduciary duty; 2) a breach of that duty; and 3) damages proximately caused by that breach. Griffin v. Fowler, 260 Ga.App. 443, 445 (Ga.App. 2003); Lyons v. Midwest Glazing, 265 F. Supp.2d 1061, 1076 (N.D. Iowa 2003); see also 37 Am. Jur. 2d Fraud and Deceit § 31. The Cadillac Lounge alleges that a fiduciary relationship existed between McAteer and itself because McAteer acted as an escrow agent in this transaction. McAteer denies that any such relationship existed. Because he represented Gaudet, McAteer contends that the only fiduciary relationship he had was to that client, not to The Cadillac Lounge.
The term "`fiduciary' is a broad concept, generally meaning `anyone in whom another rightfully reposes trust and confidence.'" A. Teixeira & Co. v. Teixeira, 699 A.2d 1383, 1387 (R.I. 1997) (citing Francis X. Conway, The New York Fiduciary Concept in Incorporated Partnerships and Joint Ventures, 30 Fordham L. Rev. 297, 312 (1961)). An escrow agent has a fiduciary duty to hold the funds pursuant to the terms of the escrow agreement; he is not an agent to either party, but a fiduciary to both of them. Kaarela v. Birkhead, 33 Mass. App. Ct. 410, 412, 600 N.E.2d 608 (). The relevant inquiry thus becomes McAteer's status as an escrow agent.
An escrow account is created when one party to a transaction delivers a sum to a third party, the escrow agent, to hold until a certain condition is met, at which point the sum is delivered to the other party to the transaction. Grand Pac. Fin. Corp. v. Brauer, 57 Mass. App. Ct. 407, 416, n.6, 783 N.E.2d 849, 859, n.6 (Mass. 2003) (citing Frontier Enterprises, Inc. v. Anchor Co. of Marblehead, 404 Mass. 506, 510, 536 N.E.2d 352 (1989)); see also Black's Law Dictionary 584 (8th ed. 2004) (defining escrow as ". . . 4. the general arrangement under which a legal document or property is delivered to a third person until the occurrence of a condition."). The intent of the parties controls whether a sum placed with the third person is an escrow or a completely executed instrument. 28 Am. Jur. 2d Escrow § 7. "When the language of the instrument is vague and indefinite, however, the court must inquire into the circumstances and conditions surrounding the execution of the agreement to ascertain the intention of the parties." Id. A formal contract is not needed to form an escrow agreement; courts have inferred such agreements from an exchange of letters. Mercurius Inv. Holding, Ltd. v. Aranha, 247 F.3d 328, 331 (1st Cir. 2001) (applying Massachusetts law) (citing Kaarela v. Birkhead, 33 Mass. App. Ct. 410, 600 N.E.2d 608, 609-10 (Mass. App. Ct. 1992)). "Moreover, while cases often speak of funds in escrow as being held by a third party, one party's counsel may act as an escrow holder so long as the parties agree that in this capacity counsel is to serve not as `the agent of either of the parties,' but as `a fiduciary of both of them.'" Id.
Here, the Court finds the existence of an escrow agreement is supported by a preponderance of the relevant...
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