Escrow agents are a fundamental tool in the practice of business and sales, however their use could lead to disputes rather than successful transactions. Take a contract for the purchase and sale of a property for example. This transaction is simple on face, but that is true only if the parties act as they agreed. A money deposit is placed into escrow and an agreement is made that the money is to be delivered to the designated party upon the performance of another condition or event, for example the relinquishment of the seller’s property rights. If the parties act according to their agreement, then the escrow agent is merely an intermediary in the deal. However, problems arise when parties do not perform as planned.
If either of the parties does not act as they agreed to or frustrates the transaction, that party terminates the deal and most likely the contract all together. The money that was placed into escrow becomes idle because the escrow agent is usually instructed not to release or refund any of the money until the dispute between the parties is settled. The escrow agent, in order to prevent the risk of multiple lawsuits against him, can file for what is called an interpleader action.
An interpleader action is defined in the Florida Rules of Civil Procedure under Rule 1.240. The rule states “persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double or multiple liability.” The State of Florida bases this rule on the theory that conflicting parties should litigate their claims among themselves without involving the plaintiff or middleman in their dispute.
An interpleader action should be entered into when the escrow agent or middleman has no interest in the money that is the subject matter of the dispute and there is no independent liability asserted against him. An interpleader action requires the intermediary to place the money into the court’s custody. The intermediary or escrow agent is then dismissed as a party to the interpleader action and the defending parties must litigate and argue for their rights to the money among themselves.
But the intermediary or escrow agent does not walk away and leave the parties to dispute before recovering costs and attorneys fees incurred in initiating an interpleader action. Escrow agents are entitled to recover these fees and costs under the Florida Rules of Civil Procedure. In the case Ellison v. Riddle (Sept. 3, 1964), the Florida District Court of Appeals, Second District, defined this entitlement. The court stated “in order to be entitled to such an award the plaintiff must prove his total disinterest in the stake he holds other than that of bringing it into court so that conflicting claims thereto can be judicially determined…the plaintiff must also show he did nothing to cause the conflicting claims.”
A typical escrow agent will have total disinterest in the money deposit they hold during a transaction or sale and will have no involvement in the creation of the conflict that is the subject matter of the lawsuit. Therefore, an escrow agent is entitled to recover the costs and attorneys fees incurred in filing the interpleader action. If you believe you are entitled to such awards, the service and assistance of a knowledgeable attorney is a valuable tool. Please contact the office of Oates & Oates for more information.
Ellen Stewart is a graduate student pursuing a juris doctor degree at Stetson University College of Law in Saint Petersburg, Florida. She is a legal research assistant for the Law Offices of Oates & Oates, P.A.