Katleman v. U.S. Communities, Inc.

• Citation: 197 Neb. 443,249 N.W.2d 898
• Decision Date: 26 January 1977
• Docket Number: No. 40654,40654
• Parties: Joel M. KATLEMAN, Appellee, v. U.S. COMMUNITIES, INC., a Delaware Corporation and Pioneer National Title Insurance Company, a California Corporation, Appellants.
• Court: Nebraska Supreme Court

Page 898

249 N.W.2d 898

197 Neb. 443

Joel M. KATLEMAN, Appellee, v. U.S. COMMUNITIES, INC., a Delaware Corporation and Pioneer National Title Insurance Company, a California Corporation, Appellants.

No. 40654.

Supreme Court of Nebraska.

Jan. 26, 1977.

Syllabus by the Court

1. Where a person assumes to and does act as the depositary in escrow, he is absolutely bound by the terms and conditions

of the deposit, and charged with a strict execution of the duties assumed.

2. If an escrow agent violates instructions or acts negligently he is ordinarily liable for any loss occasioned by his breach of duty.

3. From the time an escrow holder informs the seller that the buyer has put a payment in escrow, and the seller relies and acts on that information, the escrow holder is estopped to deny that the represented sum is on deposit.

4. In a law action tried to the court without a jury, the findings of the court have the effect of a jury verdict and will not be disturbed on appeal unless clearly wrong.

William J. Lindsay, Robert G. Decker, Omaha, for U.S. Communities, Inc.

James F. Kasher, Brady, Kasher & Pavel, P.C., Omaha, for Pioneer National Title Ins. Co.

Mark L. Laughlin, Zweiback & Laughlin, Omaha, for appellee.

Heard before WHITE, C.J., McCOWN, NEWTON, and BRODKEY, JJ., and RONIN, District Judge.

McCOWN, Justice.

The plaintiff, Joel M. Katleman, brought this action against the defendants, U.C. Communities, Inc., and Pioneer National Title Insurance Company, for the recovery of liquidated damages for breach of a contract for the purchase and sale of real estate. The District Court entered judgment in favor of the plaintiff and against the defendants in the sum of $15,000, and the defendants have appealed.

On September 6, 1973, the plaintiff, Joel M. Katleman, and the defendant, U.S. Communities, Inc., executed a contract in which Katleman agreed to sell, and U.S. Communities, Inc., agreed to purchase, 11.3 acres of industrially zoned land in Douglas County, Nebraska. Title was to be conveyed by warranty deed, free and clear of all liens and encumbrances except certain easements and restrictions. The contract provided that the transaction was conditioned upon Katleman causing Burt Avenue east of 107th Avenue to be vacated at his expense on or before closing. The purchase price was $550,000. The contract recited that U.S. Communities, Inc., simultaneously with the execution of the agreement, would deposit the sum of $25,000 with Pioneer National Title Insurance Company to be held by it in escrow. Upon closing Pioneer was to pay that sum to Katleman as a portion of the payment then due. Closing was to take place December 10, 1973. The contract provided that if U.S. failed or refused to consummate the transaction contemplated for any reason other than for specified reasons, one of which was failure to furnish marketable title, 'then all amounts paid and deposited with (Pioneer) pursuant to this agreement shall, at the option of (Katleman), be forfeited to (Katleman) as liquidated damages for (U.S.'s) failure to carry out the purchase. If (Katleman) is unable to show marketable title to the property described in Paragraph 1 hereof, subject to easements and restrictions of record, and to fulfill the other conditions hereof, * * * all monies paid and deposited with (Pioneer) shall be refunded to (U.S.).'

On September 7, 1973, U.S. executed its draft on Bank of America in the sum of $25,000 payable to the order of Pioneer. The draft was delivered to Pioneer on September 10, 1973, and Pioneer issued its receipt, which read: 'This is to confirm that Pioneer National Title Insurance Company in relation to the above real estate holds a good and sufficient draft in the amount of $25,000.00, delivered to it by U.S. Communities inc.' Pioneer never presented the draft for payment, and the inference from the record is convincing that the draft was no longer good at the time of trial.

On November 14, 1973, the parties executed a substantially similar contract replacing and superseding the contract of September 6, 1973. One change material to the issues involved here was that the closing date was changed from December 10, 1973, to February 15, 1974. The replacement contract also stated: 'It is understood and agreed that (U.S.) has heretofore deposited the sum of $25,000.00 with (Pioneer), to be held by it in escrow and to be used in connection with the closing * * *.' An assistant vice president of Pioneer signed the contract and Pioneer received a copy. On January 31, 1974, the parties deleted certain provisions of the agreement not material here, and reduced the purchase price to $510,000.

After the November 14, 1973, contract was executed, Katleman proceeded to take steps to vacate Burt Avenue. Recommendation from the city planning board was made December 4, 1973, and by February 12, 1974, the county board had voted to vacate the street. While these matters were proceeding, U.S. was having difficulty in obtaining financing. On February 13, 1974, to obtain an extension of the closing date to March 15, 1974, U.S. deposited with Katleman $10,000 to apply to the purchase price under the contract and $5,000 to be retained by Katleman as consideration for the extension. On February 19, 1974, the county board passed the official resolution to vacate Burt Avenue.

On March 11, or 12, 1974, U.S. was still having financing difficulties and proposed converting the purchase contract to an option arrangement, but Katleman rejected the proposed option. On March 14, 1974, Katleman sent a telegram to U.S. confirming that he was ready to close, but there was no closing on March 15, 1974. On March 22, 1974, an attorney for U.S. wrote Katleman demanding the return of the $15,000 paid to Katleman on February 13, 1974, and the release to U.S. of the sum of $25,000 deposited with Pioneer. The basis for the claim involved alleged defects in title arising out of the Burt Avenue vacation proceedings. Katleman made demand on Pioneer for payment of the escrow money to him, but Pioneer refused. On April...