Fickling and Walker Co. v. Giddens Const. Co., Inc.

CourtSupreme Court of Georgia
Citation258 Ga. 891,376 S.E.2d 655
Docket NumberNo. 46307,46307
PartiesFICKLING AND WALKER COMPANY v. GIDDENS CONSTRUCTION COMPANY, INC.
Decision Date23 February 1989

Ellsworth Hall III, Hall, Bloch, Garland & Meyer, Macon, for Fickling and Walker Co.

E. Thomas Shaffer, Cook & Shaffer, Macon, for Giddens Const. Co., Inc.

Quentin S. King, Edward C. Stone, amicus curiae.

MARSHALL, Chief Justice.

This case, Giddens Constr. Co., Inc. v. Fickling and Walker Co., 188 Ga.App. 558, 373 S.E.2d 792 (1988), is here on certiorari. Drawn into question are issues concerning the extent of the fiduciary obligations owed by a real-estate broker to the parties to a real-estate sale contract, where the broker is acting as the escrow agent for earnest money and other funds deposited by the buyer. The specific question for decision is whether the trial court erred in granting partial summary judgment in favor of the real-estate broker with regard to a claim for punitive damages asserted by the seller; the basis for the punitive-damage claim was the broker's refusal to agree to an unconditional release of the escrow money to the seller when the sale was not consummated within the contractually required time limit.

Facts

In order to sell certain improved real estate in Macon, Georgia, Giddens Construction Co., Inc. (Giddens), the owner of the property and the builder of the home located thereon, retained the services of Sheridan, Solomon & Co. (Sheridan), a real-estate broker who thereby became the listing agent for the property sale.

Fickling and Walker Co. (Fickling), is another real-estate broker located in Macon, Georgia. Both Sheridan and Fickling are members of an organization known as the Macon Multiple Listing System (MLS). The MLS is an organization of real-estate brokers; where property is listed for sale by a member broker as the listing sales agent, information regarding the proposed terms of the sale and a description of the subject property are made available to other member brokers, who seek to secure prospective purchasers.

Pursuant to this arrangement, Fickling secured Alan and Bettye Roberson (the Robersons) as prospective purchasers for the Giddens' property.

A real-estate sale contract was entered into between Giddens and the Robersons on July 27, 1985. The sale contract contained certain financing contingencies, and it was required that the sale be closed on or before October 30, 1985. Under the terms of the contract, $1,000 in earnest money was deposited with Fickling by the Robersons in Fickling's capacity as "escrow agent."

Because the Robersons wished to take possession of the property prior to their obtaining financing and closing the sale, a "move-in agreement" was entered into between the parties. This agreement allowed the Robersons to take possession of the property as of August 10, 1985, and the Robersons were required to pay Giddens a $750 monthly rental fee, as well as make a $400 security deposit to be held by Fickling. In this agreement, reference was made to Fickling as "[s]eller's agent."

The closing of the property sale did not take place as of October 30, 1985, as required by the sale contract. Consequently, an addendum to the sale contract was executed on November 2, 1985, for the purpose of extending the closing date until November 30, 1985, as well as extending the move-in agreement and rental payment by one month. The addendum also contained the following paragraph:

It is expressly understood and agreed to by all parties that, if for any reason this sale is not consummated by November 30, 1985, the $1,000 earnest money and the $400 security deposit shall be forfeited as liquidated damages and the sales contract shall become null and void. In such event purchaser shall vacate premises no later than December 10, 1985. Time is of the essence.

The sale did not close as of November 30, 1985, as required by the addendum. Giddens, by letter dated December 12, 1985, demanded that Fickling remit to Giddens the $1,000 in earnest money and the $400 security deposit being held in escrow.

On December 23, 1985, an officer of Fickling tendered to Giddens' counsel a $1,400 check for the foregoing sums and a mutual-release agreement signed on behalf of the Robersons. Under the terms of the release agreement, the seller and the purchasers were to be released from "any and all claims or obligations" arising from the sale contract. Fickling sought to obtain the signatures of all parties on this agreement, because Fickling was of the opinion that Regulation § 520-1-.34(2)(d)--an administrative regulation promulgated by the Georgia Real Estate Commission--required Fickling, as escrow agent, to secure such an agreement signed by all parties at interest prior to disbursing the funds from the escrow account.

Giddens' counsel refused to sign the release and suggested that resolution of the controversy be deferred until after the Christmas holidays. Giddens' counsel next contacted Fickling on January 6, 1986. When it became apparent that the parties were unable to resolve this matter in a manner satisfactory to Giddens, Giddens' counsel suggested that Fickling consult with its attorney. Before such consultation could be arranged, the instant action was filed by Giddens on January 15, 1986.

In this action, Giddens has sought, among other things, an award of punitive damages for breach of fiduciary duty, fraud, and conversion, as a result of Fickling's refusal to agree to an unconditional release of the escrowed funds on demand by Giddens. Fickling responded to the action, tendering the subject monies into the court registry. The trial court granted Fickling's motion for partial summary judgment with respect to Giddens' punitive-damage claim.

Court of Appeals' Decision

On appeal, the Court of Appeals reversed the foregoing ruling.

Initially, the Court of Appeals rejected Fickling's argument that punitive damages are not awardable here, since this is an action for breach of contract. In this regard, the Court of Appeals held that Fickling could be held liable to Giddens in tort, in addition to being held liable for breach of contract, in that the facts of this case establish that Fickling was Giddens' duly appointed subagent 1 and thus was Giddens' fiduciary regarding those matters within the scope of the agency.

The Court of Appeals next held that under the language employed in the addendum to the sale contract, Fickling was under an unequivocal duty to remit the escrow monies to Giddens if, for any reason, the property sale was not consummated by November 30, 1985. In this regard, the Court of Appeals reasoned that when the sale was not consummated as of the foregoing date, there was a termination of the escrow agreement, as well as any dual agency that may have existed pursuant thereto, thereby resulting in Fickling's resuming to act solely as Giddens' fiduciary. On this basis, the Court of Appeals concluded that Fickling thereby became subject to a duty owed by an agent to its principal not to dispute the principal's right or title to funds received by the agent for the account of the principal. Courts v. Jones, 61 Ga.App. 874, 876, 8 S.E.2d 178 (1940) and cits.

Finally, the Court of Appeals rejected Fickling's claim that it is shielded from liability, in that, in setting down the conditions for release of the money in escrow, it was merely following requirements contained in Regulation § 520-1-.34, supra, of the Georgia Real Estate Commission. 2

Holdings

For reasons which follow, we reverse. In this regard, we hold that during the period in which Fickling remained in possession of the escrow-money fund, Fickling continued to function as the dual agent of both seller and buyers, and not the subagent of only one. We further hold that, notwithstanding the contractual language purporting to give Giddens an automatic entitlement to the escrow money upon failure of the sale to be consummated by the specified date, there is no basis in the evidence to support an award of punitive damages against Fickling for its action in regard to disbursement of the escrow money here.

1. As previously stated, the present case involves a real-estate broker's acting as an escrow agent for the purpose of holding earnest money and a security deposit tendered by the real-estate purchasers.

Williams v. Northside Realty Assoc., Inc., 116 Ga.App. 253, 254, 157 S.E.2d 166 (1967) and Carter v. Turbeville, 90 Ga.App. 367, 370-371(1a), 83 S.E.2d 72 (1954), clearly explain that in a situation such as this, the escrow agent is properly classified as the agent of both parties, rather than as a subagent of only one of the parties with a fiduciary responsibility owed solely to that party.

(a) As stated in Williams,

Georgia is among the states which hold that money or an instrument evidencing indebtedness may be the subject of an escrow, and that a real estate broker under these circumstances is an escrow agent. Carter v. Turbeville, 90 Ga.App. 367 (83 SE2d 72) [1954]; McGinley v. Chappas, 91 Ga.App. 418(1) (85 SE2d 791) [1955]. As such, he is the agent of both parties, and no liability attaches from his failure to do anything not required by the express terms of the escrow or the intention and agreement of the parties. 30A CJS 992, Escrows, § 8.

Williams v. Northside Realty Assoc., Inc., 116 Ga.App. 253, supra at 254, 157 S.E.2d 166.

(b) As stated in Carter,

the Supreme Court in Wellborn v. Weaver, 17 Ga. 267, 275 [1854], said: 'In every case of an escrow there is a contract and privity between the grantor and grantee. The person to whom the deed is delivered is, by mutual agreement, constituted the agent of both parties.'

See, in this connection, 19 AmJur 430, sec. 13, as follows: 'In a broad sense, every depositary of an escrow is the agent of both parties. For the purpose of making delivery upon the performance of the conditions, he is no less the agent of the grantee than the agent of the grantor. He is empowered to aid...

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