Friday, August 14, 2009

Third-Party Liability Of Lawyer As Escrow Agent

The South Carolina Supreme Court upheld a court of appeals decision that reversed a trial court grant of summary judgment on behalf of an attorney who had been sued by a non-client for alleged violation of escrow obligations. The court held:

Weinberg [the attorney] argues that the court of appeals erred in reversing the trial court’s grant of summary judgment on the negligence claim.  We disagree.

In a negligence action, a plaintiff must show that (1) the defendant owes a duty of care to the plaintiff, (2) the defendant breached the duty by a negligent act or omission, (3) the defendant’s breach was the actual and proximate cause of the plaintiff’s injury, and (4) the plaintiff suffered an injury or damages. 

Weinberg contends that allowing a cause of action against an attorney under these circumstances will intrude upon the attorney/client relationship and greatly hinder an attorney’s ability to represent his client.  In our view, Weinberg’s argument misses the mark.  Weinberg acted as the escrow agent and owed a fiduciary duty to Moore by virtue of this role.  Therefore, it makes no difference that Weinberg was Wheeler’s lawyer and represented him in other matters.  Under the facts of this case, the duty arises from an attorney’s role as an escrow agent and is independent of an attorney’s status as a lawyer and distinct from duties that arise out of the attorney/client relationship. 

Furthermore, we hold that Moore presented evidence that Weinberg’s performance fell below the standard of care.  In addition to submitting an affidavit from an attorney stating that Weinberg breached the standard of care, Weinberg essentially admitted that he was negligent in failing to disburse the funds in accordance with the agreement by testifying that he simply overlooked the terms of the agreement. 

Accordingly, we hold that the trial court erred in granting Weinberg’s motion for summary judgment on the negligence claim...

Weinberg argues that the court of appeals erred in reversing the trial court’s grant of summary judgment on the conversion claim.  We disagree.

Conversion is defined as the unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another to the exclusion of the owner’s rights. Money may be the subject of conversion when it is capable of being identified and there may be conversion of determinate sums even though the specific coins and bills are not identified.  

          Moore alleged in the complaint that he owned an interest in the proceeds from the litigation pursuant to the assignment, that Weinberg was aware of his interest in the proceeds, and that Weinberg wrongfully disbursed those proceeds.  Viewing the evidence in a light most favorable to Moore, a genuine issue of material fact exists as to the conversion claim, and the court of appeals therefore correctly reversed the trial court’s grant of summary judgment.  (citations omitted)

(Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2009/08/the-south-carolina-supreme-court-reversed-a-trial-court-grant-of-summary-judgment-on-behalf-of-an-attorney-who-had-been-sued.html

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