Maryland Title & Escrow Corp. v. Kosisky

• Decision Date: 14 December 1966
• Docket Number: No. 523,523
• Citation: 245 Md. 13,225 A.2d 47
• Parties: MARYLAND TITLE & ESCROW CORPORATION v. Joseph S. KOSISKY et ux.
• Court: Maryland Court of Appeals

Page 13

245 Md. 13

225 A.2d 47

MARYLAND TITLE & ESCROW CORPORATION v. Joseph S. KOSISKY et ux.

No. 523.

Court of Appeals of Maryland.

Dec. 14, 1966.

Ronald Willoner and Glenn B. Harten, College Park, for appellant.

Kardy, Brannan & Neumann and William J. Brannan, Jr., Silver Spring, for appellees.

Before HAMMOND, C. J., and HORNEY, OPPENHEIMER, BARNES and FINAN, JJ.

HAMMOND, Chief Judge.

Mr. and Mrs. Kosisky on April 24, 1963, contracted to buy a lot, later to be known at 8 Crest Park Court, Silver Spring, on which Rose Construction Company (Rose), the vendor, was to build a house like a model house in the subdivision. The purchase price was $33,990, to come from a first deed of trust of $24,000 and a cash payment of $9,990. The contract expressly was made contingent upon the sale of the residence then owned by the Kosiskys at 10704 Blossom Lane.

The Kosiskys sold their house to a Mr. and Mrs. Hatter and settlement was made on October 25, 1963, at the office of a settlement agent, one Sapero. The Kosiskys were entitled to receive $9,953.88 net of the purchase price, and although they had had no prior connection with Sapero this amount was left with him in escrow to be paid by him to Rose on account of the purchase price of 8 Crest Park Court under an irrevocable assignment to Rose executed by the Kosiskys. On October 28 the Kosiskys attended the settlement of 8 Crest Park Court at the offices of the Maryland Title & Escrow Corporation (Maryland Title), which was insuring the title of the first deed of trust lender, and paid the title company a closing fee. The Kosiskys advised the settlement officer, Beadel, of the assignment to Rose and the settlement sheet (case No. 14508) shows that of the purchase price of $33,990, $18,000 was to come from a first deed of trust, $9,953.88 'By proceeds assigned from Philip Sapero, Atty,' and the balance in cash from the Kosiskys. Beadel, one of three equal owners of the title company, knew that Sapero had worked for another title company and had afterwards 'gone into business for himself in Montgomery County.' The lender's check for $18,000 was received on November 8 and on November 12 the title company recorded the deed from Rose to the Kosiskys and the deed of trust from the Kosiskys to the lender and paid the purchase price to Rose, although Sapero had not paid over the money in his hands.

The memo calendar of the settlement officer under date of November 14 bears the notation 'Call Sapero for money on case 14508.' On November 20, the calendar shows this: 'Call Sapero regarding picking up check on case 14508.'

Sapero testified that he obtained the financing for the Hatters for their purchase of the Blossom Lane property, that he had not known the Kosiskys, that he could not find a confirming check stub but that he had written a check for $9,953.88 to Maryland Title and signed it (although he knows now they never received it), that at the time he definitely had the funds on hand to pay the check and that his financial difficulties arose later, that a week or two after the settlement at Maryland Title he got a telephone call from Beadel who told him he would send someone over to Sapero's office to pick up the check to which Sapero replied 'fine.' He recalls thereafter signing the check and telling the girl in his office to give it to the messenger when he arrived. He then forgot about the matter until some time after June 1964 when Beadel called to advise him that the title company had never received the money, and made demand on him for it. The demand was not met and suit was filed against him and the Kosiskys on October 6, 1964.

Beadel testified that in the first half of 1964 he heard or read that Sapero had 'gone bad' and said to Edwards, one of the co-owners of the title company, 'weren't we lucky to have gotten the approximately ten thousand dollars he owed us on a settlement * * *.' Edwards checked and found they had not been lucky. The Maryland Title file shows a letter from Edwards to Sapero under date of July 28, 1964, which says 'with further reference to our conversation of today,' and then advises Sapero the $9,953.88 has not been disbursed to Maryland Title and requests payment.

The suit of the title company against the Kosiskys and Sapero was on the common counts for monies paid, monies received for the use of the plaintiff and monies found to be due on an account stated and on special counts, which set out the underlying facts and alleged that the Kosiskys had represented that $9,953.88 was in possession of Sapero and would be paid to Maryland Title and that 'relying on the representations' Maryland Title paid Rose $9,953.88 and had not been reimbursed, and further alleged that Maryland Title's loss was caused by its 'erroneous or mistaken belief' that the money was to be forthcoming from Sapero. The Kosiskys interpleaded the Hatters but Maryland Title did not plead over against them.

The parties duly moved for summary judgments in their respective favors and it was agreed by Maryland Title, the Kosiskys and the Hatters that there was no dispute as to any material fact and that they would submit the case to the court on the motions for summary judgment. Judge Anderson considered the depositions of Beadel and Sapero and the exhibits under Maryland Rule 610 d 1 and decided that the Kosiskys had not expressly or impliedly agreed to repay to Maryland Title any part of the purchase price it paid out and that Maryland Title's loss was brought about by its own negligence and granted judgment in favor of the Kosiskys and the Hatters. He entered judgment against Sapero. Maryland Title appealed but Sapero did not.

The case presents problems of two escrows. There seems to have been an assumption by Judge Anderson and a concensus of the parties on appeal that as far as the Sapero escrow of the net purchase price of the Blossom Lane property is concerned the established rule of law prevails and the Kosiskys had legal title to the monies they assigned to Rose at the time they assigned them and that, this being so, the risk of loss of the monies arising from the default or abscondence of the escrow holder would ordinarily be on them. 'If the escrow holder loses or disposes of an escrow, the one having the legal title to it at the time has the risk of loss and a corresponding claim against the escrow holder if the loss is caused by the latter's fault.' 1 Restatement (Second), Agency § 14D.

'As between a vendor and purchaser, if property or money deposited by the purchaser is either lost or embezzled by the escrow holder, the loss falls on the one who owned the property or money at the time of its loss or embezzlement. If the escrow holder embezzles the purchase price before the time when, under the terms of the escrow, the vendor is entitled to it, the loss falls on the purchaser; but if the money is embezzled after the time when the vendor has become entitled to it the loss falls on him.' 30A C.J.S. Escrows § 9, p. 995.

See also Annotation, 39 A.L.R. 1080; Hildebrand v. Beck, 196 Cal. 141, 236 P. 301, 39 A.L.R. 1076; Lieb v. Webster, 30 Wash.2d 43, 190 P.2d 701, 702; Crum v. City of Los Angeles, 110 Cal.App. 508, 294 P. 430, 432; Majors v. Butler, 99 Cal.App.2d 370, 221 P.2d 994, 997. There can be little, if any, doubt that the escrow arrangement with Sapero contemplated that the Kosiskys' deed to the Hatters was to be delivered immediately, that simultaneously the purchase money was to become the property of the Kosiskys and that it was their property when they signed the writing ordering Sapero to pay it to Rose.

The determination that ordinarily the risk of loss of the Sapero escrow would be on the Kosiskys narrows the crucial question to whether the Kosiskys or Maryland Title under the circumstances here present should bear the loss of that escrow money. Subrogation is not specifically mentioned in the pleadings nor, we are told, in the trial briefs, and was not referred to by Judge Anderson in his opinion. This would not preclude the application of the doctrine of subrogation if the pleadings alleged the elements...