Unincorporated Business Entities Law

In Moore v. Weinberg, Opinion No.  26702 (SC August 12, 2009), a lawyer was representing a plaintiff in a law suit in which $100,000 had been deposited in escrow with the clerk of the court.  The lawyer’s client borrowed money from Lender, and gave Lender a security interest in the client’s interest in the escrowed funds.  The lawyer had drafted the documents for the loan and lien.  When the lawsuit settled, and the lawyer received the funds in escrow, the lawyer apparently forgot about the lien, and paid the money to the client. 

Lender sued lawyer for negligence and conversion, and the trial court granted summary judgement in favor of the lawyer.  On the negligence claim, the Supreme Court reasoned that the lawyer had assumed the role of an escrow agent:

[Lawyer] 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, [this] argument misses the mark.  [Lawyer] acted as the escrow agent and owed a fiduciary duty to [Lender] by virtue of this role.  Therefore, it makes no difference that [Lawyer] was [the client’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. 

* * * … [Lawyer]  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. 

I would agree with the Court if the lawyer had assumed the role of escrow agent.  According to the opinion, the funds were in the registry of the Court–the county clerk was the escrow agent.  It seems to me that the lawyer never assumed the role of escrow agent.  If that’s the case, it’s hard to see how the lawyer owed fiduciary duties to Lender.  Still, the opinion only reversed the summary judgment; there is no finding by the fact-finder that the lawyer acted as escrow agent.  There’s still time to get this issue right.

Apart from the negligence claim, there was also a conversion claim.  As to that, the Court found that there a material issue was a material question of fact on the issue of whether the lawyer had knowing converted the funds by [paying them to the client.

Hat tip Legal Profession Blog.

Gary Rosin