Petition — Wagman v. Lee

ee oe eo

88-105 JUL 20 i983

No. ALEXANDER L. STEVAS,

CLERK

In The

SUPREME COURT OF THE UNITED STATES

October Term 1983

ARTHUR M. WAGMAN,

Petitioner

Vv

DEBRA F. J. LEE,

Respondent

PETITION FOR A WRIT OF CERTIORARI

TO THE DISTRICT OF COLUMBIA

COURT OF APPEALS

FRANK J. COVIELLO

Attorney for Petitioner

30 Courthouse Square

Rockville, Maryland 20850

(301) 340-9155

QUESTIONS PRESENTED

1. Was it error to deny petitioner's

motion for directed verdict on the count,

"Breach of Fiduciary Duty" where the claim

of respondent was that petitioner, who, as

seller's counsel, accepted and held, as

escrow agent, the deposit respondent paid

when the purchaser, her roommate, solely

Signed the contract to purchase realty

and to which she was not a party, but that

when a lender required a co-borrower for

new financing, she had joined in a subse-

quent contract from which she withdrew on

breaking off with the purchaser, because

petitioner credited the deposit to pur-

chaser at settlexent without declaring

first a forfeiture against respondent?

ii

2. Was it error to instruct the jury

and for the Appellate Court to affirm that

compensatory and punitive damages could be

assessed against petitioner, a lawyer for

the seller, for breaching his fiduciary

duty as escrow agent to respondent, not a

party to the original contract on which

she had advanced the deposit for purchaser,

by crediting purchaser with that deposit

at settlement after respondent had left

purchaser and withdrawn from a subsequent

contract on which she was listed as a co-

purchaser solely to obtain new financing?

iii

3. Was it error for the trial court

and appellate court to deny petitioner's

claim that the trial court lacked juris-

diction because he, a member of the Bars

of the District and Maryland, resided in

Maryland and maintained there his only

office in which all dealings pertaining to

the transaction giving rise to the alleged

breach of fiduciary duty, were conducted,

that he, as escrow agent in Maryland, was

given the deposit money, banked it and, at

settlement, credited it to the purchaser;

and that the tortious injury, if any, to

respondent occurred in Maryland, where

petitioner was served with process under

jthe "long arm" statute of the District of

Columbia?

iv

TABLE OF CONTENTS

Page

OPINION BELOW 2

JURISDICTION 2

CONSTITUTIONAL PROVISION INVOLVED 2

STATEMENT OF THE CASE 3

A. Introduction 7

B. The Facts 4

Cc. The Trial 6

D. The Court of Appeals Opinion 8

REASONS FOR GRANTING THE WRIT

A.

B.

The Court erroneously instructed

the jury, contradicting itself 10

The Allowance of punitive dam-

ages was based not on evidence

of misconduct as an escrow agent

but because petitioner is a

lawyer. a2

Jurisdiction based on the "long

arm" statute must be in accord

with the terms of the statute 14

CONCLUSION 15

APPENDIX

Opinion of the Court of Appeals A-1l

Denial of Rehearing A-10

TABLE OF AUTHORITIES

Cases Page

Brown v Coates, 102 US App DC 304 13

Ferguson v Casper, 359 A2d 17 (DC1976) 11

Gatewood v Fiat, 617 F2d 820 (DCCirl980)15

Hamby v St. Paul Mercury Indemnity

Co., 217 F2d at 78 9,13

Lott v Burning Tree Club, Inc.

516 F Supp 913 (DDC1980) 14

Meyers v Smith, 460 F Supp 621(DDC1978) 15

National Bank of Washington v Equity

Investors, 81 Wash2d 886, 506 P2d 20

(1973) 12

Statutes and Other Authorities

Title 13, Sec. 423(a) District of

Columbia Code 14

Title 13, Sec. 424, District of

Columbia Code 14

In The

SUPREME COURT OF THE UNITED STATES

October Term 1983

No.

ARTHUR M. WAGMAN,

Petitioner,

Vv.

DEBRA F. J. LEE,

Respondent

PETITION FOR WRIT OF CERTIORARI TO THE

DISTRICT OF COLUMBIA COURT OF APPEALS

Arthur M. Wagman respectfully prays

that a writ of certiorari issue to review

the opinion and judgment of the District

of Columbia Court of Appeals entered on

February 23, 1983.

2

OPINION BELOW

The District of Columbia Court of Ap-

peals affirmed the jury verdict in the

lower court. Its opinion appears in the

Appendix hereto at A-l.

JURISDICTION

On April 21, 1983, the Court of Appeals

entered a judgment denying petitioner's

Motion for Rehearing en Banc. It appears

in the Appendix hereto.

CONSTITUTIONAL PROVISION INVOLVED

United States Constitution, Amend-

ment XIV:

SECTION 1. All persons born or natu-

ralized in the United States, and sub-

ject to the jurisdiction thereof, are

citizens of the United States and of

the State wherein they reside. No

State shall make or enforce any law

which shall abridge the privileges or

immunities of citizens of the United

States; nor shall any State deprive

any person of life, liberty, or pro-

perty, without due process of law;

nor deny to any person within its

jurisdiction the equal proptection of

the laws.

3

STATEMENT OF THE CASE

A. INTRODUCTION:

This Court should review the decision

of the Court of Appeals for three compel-

ling reasons.

THE COURT OF APPEALS REACHED AN IL-

LOGICAL 'RESULT: It confused the role of

petitioner as the seller's lawyer and as

escrow agent. It confused the first con-

tract to which respondent was not a party

with a third contract which she joined as

co-borrower for the sole purpose of ob-

taining new financing. Erroneously, it

found respondent had entrusted her funds

to petitioner, and made other factual

errors.

THE COURT OF APPEALS HAS CREATED A

CONFLICT IN THE LAW: In reaching its il-

logical conclusion, it made her the de-

positor on the third contract because she

had advanced the deposit to the purchaser

on the first contract, held the escrow a-

gent responsible to her, and equated his

conduct for crediting the original con-

tract purchaser with the deposit after

respondent had withdrawn from the third

contract.

THE COURT OF APPEALS INCORFICTLY HELD

PETITIONER'S OBJECTION TO JURISDICTION WAS

WITHOUT MERIT: This finding was a foot-

note to the opinion.

B. THE FACTS.

On March 19, 1975, petitioner, a mem-

ber of the District of Columbia and Mary-

lan Bars, acting for a client, entered in-

to a contract for the sale of her house

in the District of Columbia to David A.

Brooks with whom respondent, Debra F. J.

Lee, was then living. Lee gave her check

on a Virginia bank for $3000 as the de-

posit. Settlement was deferred because

possession could not be given, the tenant

not having vacated. Possession was given

in May 1975 at which time Brooks asked for

settlement to be deferred because he was

unemployed.

From the beginning of their occupancy

Brooks and Lee were behind in their rent-

al payments, the sole source of funds to

pay the monthly notes.

In August i976, Brooks gave his check

for $1,000, the additional payment due un-

der the original contract, and entered in-

to another contract with the seller for

the purpose of obtaining a new loan. The

loan was approved but only with a co-bor-

rower. On September 1, 1976, Lee joined

in this third contract and the loan appli-

cation, and the loan was granted. Nothing

was added to the deposit.

Shortly thereafter, Lee ended her re-

lationship with Brooks, moved out of the

house, and withdrew from the contract and

the loan application, all without notice

to petitioner or his client. Brooks ob-

tained another co-borrower and settlement

washeld in February 1977 at which time

the origianl deposit of $4000 was credited

to the purchase price.

No forfeiture was declared against Lee

when she refused to honor the third con-

tract.

All negotiations and dealings between

the parties were conducted in the office

of petitioner in Maryland. All funds were

received, banked, and disbursed, and the

settlement was held in Maryland.

€. THE TRIAL

Prior to trial, Lee's first count for

specific performance was dismissed because

petitioner did not own the property. At

the conclusion of her case, two counts,

Breach of Contract and Interference with

her contractual relationship with Brooks,

were dismissed on motion, and the last

count, Breach of Fiduciary Duty, was al-

lowed to stand.

At one point in the trial, the Court

stated Lee was not a party to the first

contract. Therefore, Brooks was the sole

depositor.

Lee testified all negociations and

most dealings were between Brooks and

petitioner, that she had left Brooks and

the house, had withdrawn her loan appli-

cation without notice to petitioner or

his client and refused to go to settle-

me ct.

The Court's findings were inconsistent.

It held Lee was not a depositor under the

first contract. Later, it said Thigpen,

the substituted co-ourchaser, had no

claim to the deposit. Then, it told the

jury that Lee was the depositor and en-

titled to recover compensatory and puni-

tive damages because neither there had

been neither settlement nor forfeiture

had been taken place under the first or the

third contracts.

This faulty reasoning led the Court to

deny the motion for directed verdict as to

the last count, and to instruct the jury it

could award punitive damages.

D. THE COURT OF APPEALS' OPINION

The appellate opinion was replete with

errors of fact. It stated contrary to the

record that petitioner had provided legal

services to Brooks in the past; that the

settlement was delayed because an addition-

al $1000 payment was required; that peti-

tioner presented to Brooks a second real

estate contract which purported to sell the

house to Brooks without knowledge of Lee

and was never executed; that the default in

loan payments was not the fault of Lee;

and concluded by saying "Appellee gave to

appellant $4,000 to purchase a home for

her, entrusting to him money to be used

for a specific purpcse." To support this

conclusion, it cited HAMBY v ST. PAUL

MERCURY INDEMNITY CO., 217 F2d at 78.

Nothing in the record supports that

conclusion. Nothing in the record says

that petitioner furthered his self inter-

est with that deposit. His testimony was

that he believed Brooks to be the deposi-

tor under the March 1975 contract and the

record reflects Brooks received the bene-

fit of that deposit at settlement.

The lack of forfeiture did not make

petitioner's conduct so reprehensible as

to justify punitive damages. At the

worst, it was inadvertent or negligent if

Lee became a depositor by signing the third

contract. As escrow agent, he was a stake

holder, not an agent entrusted by Lee to

purchase a home for her.

10

REASONS FOR GRANTING THE WRIT:

A. THE COURT ERRONEOUSLY INSTRUCTED THE

JURY ON THE FACTS, CONTRADICTING ITSELF.

The Court stated emphatically that Lee

was not a party to the March 1975 contract.

(TR 292,L21-TR 293,L10). Then, the jury

was instructed that Lee was the depositor

and that since neither settlement nor for-

feiture occurred under the first contract

or the third contract, petitioner had

breached his fiduciary duty to her as her

escrow agent. (2TR2,L5-2TR7L17)

But the Court below and the Appellate

Court did not clarify how and when Lee be-

came the depositor.

Settlement did take place with the

Original purchaser and depositor, Brooks.

Since Lee was not a party to the first

contract, she was not a depositor thereon.

Since she had joined in the third contract

only for the purpose of financing and at

ll

that time paid no money, that did not make

her a depositor anymore than Thigpen was a

depositor on the fourth contract.

FERGUSON v CASPER, 359 A2d 17 (D.C.1976)

B. THE ALLOWANCE OF PUNITIVE DAMAGES WAS

BASED NOT ON EVIDENCE OF MISCONDUCT AS AN

ESCROW AGENT, BUT BECAUSE PETITIONER IS A

LAWYER. ;

If a forfeiture had been declared, Lee

would not have been entitled to recover,

according to the trial court. This was

affirmed by the Appellate Court. If Lee

became a depositor when she signed the

third contract, did she still remain a

depositor when she refused to honor that

contract? Apparently, she did in the eyes

of both courts since neither has addressed

itself to that question.

The escrow agreement sequence was es-

tablished in FERGUSON v CASPER, 359 A2d 17

(D.C. 1976) which said:

12

"A valid escrow agreement is a tri-

angular arrangement. First, there must

be a contract between the seller and the

buyer agreeing to the conditions of a

deposit. Then there must be a delivery

of the items on deposit to the escrow

agent and he must agree to perform the

function of receiving and dispersing

the items. The agreement by the buyer

and the seller to all the terms of the

escrow instructions and the acceptance

by the escrow agent of the position of

depositary create the escrow."

This triangular arrangement came into

existence in the first contract. The pur-

pose for which the money was deposited

with petitioner, that of conveying the real

property to Brooks and whomever he desig-

nated, was done

Moreover, the principals to the escrow

are the parties who sign the contract es-

tablishing the escrow.

NATIONAL BANK OF WASHINGTON v EQUITY

INVESTORS, 81 Wash 2d 886, 506 P2d 20

(1973)

Petitioner's belief that Brooks was

the only depositor, as a result of which

13

he received the benefit of the deposit,

does not give rise to such reckless, wan-

ton or malicious conduct justifyin puni-

tive damages. Petitioner did not consider

Lee his client or the depositor, nor did

he appropriate that deposit for himself.

Both Courts ignored the testimony that

Lee had breached the third contract with-

out notice and that petitioner had tried

for over two months to resolve the situa-

‘tion with no cooperation from Lee.

(TR 411,L1-TR413,L1)

The Appellate Court likened the acts

of petitioner as escrow agent to that of

the brokers in HAMBY v ST. PAUL MERCURY

INDEMNITY CO., 217 F2d at 78, and BROWN v

COATES, 102 US App D.C. 304, who, in each

case, appropriated their clients' funds.

None of the facts justifies such a compar-

ison.

14

C. JURISDICTION BASED ON THE "LONG ARM"

STATUTE MUST BE IN ACCORD WITH THE TERMS

OF THE STATUTE.

Title 13-423(a) sets forth the condi-

tions under which service in a fcreign

jurisdiction may be obtained. Strict com-

pliance is required. In order for a court

properly to assert personal jurisdiction

over a nonresident defendant, service of

process on the nonresident must be both

authorized by statute and within the limits

set by the due process clause of the United

States Constitution

LOTT v BURNING TREE CLUB, INC., 516 F.Supp

913 (D.D.C.1980)

TITLE 13-423(a) and 424, DISTRICT OF COLUM-

BIA CODE

Lee suffered no injury in the District

of Columbia. The escrow relationship was

created in Maryland. The breach, if any,

of fiduciary duty occurred in Maryland.

15

Any money that Lee might have lost by any

act of petitioner was lost in Maryland.

GATEWOOD v FIAT, 617 F2d 820 (D.C.Cir. 1980)

Even if the contacts of petitioner as

member of the District of Columbia Bar but

without an office there, are sufficient

for jurisdiction, the injury aint still

occur in the District. No jurisdiction

lies where both the tort and the injury

occur outside the District.

MEYERS v SMITH, 460 F Supp 621 (DDC 1978)

CONCLUSION

The issues presented in this petition

are fundemental and require clarification.

A deliberate breach of trust by a lawyer

is a most serious ethical violation. To

be charged with breach of fiduciary duty

is a taint that can destroy a career. No

argument was heard by the Appellate Court.

16

Petitioner is entitled to be heard.

Respectfully submitted,

FRANK J. COVIELLO,

Attorney for Petitioner

30 Courthouse Square

Rockville, Maryland 20850

(301) 340-9155

DISTRICT OF COLUMBIA COURT OF APPEALS

No. 81-768

ARTHUR M. WAGMAN, APPELLANT,

v.

DEBRA FJ. LEE, APPELLEE. - /

Appeal from the Superior Court “ naj

ag

of the District of Columbia ce. pO

(Hon. William C. Gardner, Trial Judge) Jy

(Submitted December 1, 1982 Decided February 23, )

Alan B. Moldawer was on the brief for appellant.

John W. Karr was on the brief for appellee.

Before KELLY and TERRY, Associate Judges, and

GALLAGHER, Associate Judge, Retired.

GALLAGHER, Associate Judge, Retired: A jury awarded

appellee $4,000 compensatory and $15,000 punitive dam-

ages for appellant’s breach of fiduciary duty. Appellant

argues that as escrow agent his legal relationship with

depositor appellee is contractual, not fiduciary; alterna-

tively, he contends that his conduct was insufficiently

egregious to justify imposition of punitive damages. We

affirm. '

' Appellant’s objections to jurisdiction, service of proces:

and failure to join an indispensable party are without merit

[420]

A- 2

In late 1974, appellant, an attorney, suggested to ap-

pellee and her roommate, David Brooks, the possibility

of purchasing a home. Appellant had provided legal serv-

ices to Brooks in the past and was owner, inanager of the

puilding in whicn Brooks and appellee together rented an

apartment. Appellant indicated various tax advantages

of home ownership and added that one of his clients, Ora

Lee Shipp, owned a house at 1225 Decatur Street, N.W.,

which she desired to sell. Appellant had represented

Shipp for many years and explained that her current fi-

nancial position made likely a sale at a “distressed”

price. Brooks and appellee expressed interest.

Appellant evicted tenants living in the house and pre-

pared a contract of sale. The contract established a sell-

ing price of $36,000 and permitted the purchaser to as-

sume two outstanding notes secured by first and second

deeds of trust. The agreement further required the pur-

chaser to pay $3,000 cash at tne time of conveyance and

$1,000 within thirty days and provided for full settle-

ment at appellant’s office 20 days later. Appellee had

drawn a cashier’s check for $3,000 to appellant’s order,

and on March 19, 1975, met with appellant and Brooks.

At appellant’s office, appellee examined the contract and

noticed the absence of her name. She withheld delivery

of the $3,000 until appellant wrote on the bottom of the

form, “to be conveyed in the name of David A. Brooks

and Debra F.J. Lee.” Appellant accepted, endorsed and

deposited the check into his escrow account in Mary-

land National Bank. Thereafter, appellee and Brooks

moved into the house, and for the following year and a

half, undertook substantial renovations.

Settlement of the contract did not occur within thirty

days. Responding to appellee’s inquiries as to the reason

for delay, appellant stated that payment of the addi-

tional $1,000 required by the contract was a condition of

(421)

A- 3

settlement. Appellee gave to Brooks $1,000 to bring to

appellant, which he did on August 13, 1976. Appellant

later confirmed receipt in a telephone conversation with

appellee. Still, however, there was no settlement, for at

this point, a series of three subsequent contracts compli-

cated the situation.

On the day Brooks conveyed the additional $1,000 to

appellant, appellant presented to him a second real estate

contract which purported to sell the house solely to Brooks

without knowledge of appellee. Signed by Shipp, the

agreement provided a selling price of $49,500 and required

a down payment of $12,500. This contract was never

executed, nor did appellee learn of its existence until

trial.

Two weeks later, appellant summoned Brooks and ap-

pellee to his office, and on September 1, 1976, provided

to them another proposed contract. This agreement re-

tained Brooks and appellee as purchasers but increased

the original selling price from $36,000 to $49,500 and the

down payment from $4,000 to $9,500. The contract also

required financing at current interest rates. Appellee

questioned these changes, but appellant said they were

necessary because the realty company would no longer

permit assumption of the outstanding notes due to recent

default in payments, through no fault of appellee. Ap-

pellee signed the contract but luter refusea iv .omplete

the residential loan application necessary to obtain addi-

tional financing. At trial she testified, “I didn’t want any

part to do with getting myself into . . . deeper waters

financially, and I also questioned about the rightness of

this contract.” *

* Appellee explained her concerns as follows: ‘Well, my

understanding from Mr. Wagman [appellant] was that the

sales price was still going to remain $36,000, and that this

(422)

A- 4

In early 1977, a fourth contract, orally executed, finally

sold the house, but not to appellee. After she refused to

procure a loan, Brooks, following appellant’s advice, ob-

tained another co-purchaser, Donald Thigpen. Brooks and

Thigpen, without appellee, settled the contract on Feb-

ruary 28, 1977. They used appellee’s $4,000 as part of

the down payment, without which, according to appellant,

“there was not enough money to go through with the

transaction.”

Appellee sued appellant for breach of fiduciary duty.’

Appellant testified that he had acted as escrow agent for

buyer and seller, and received $3,000 on March 19, 1975,

and $1,000 in August 1976. He stated that neither an

“official” nor “unofficial” forfeiture of these funds oc-

curred; rather, the $4,000 “was applied and given credit

to Mr. Brooks in the 1977 sale.” At the close of evidence,

the trial court ruled that appellant had breached his fidu-

ciary duty as escrow agent in misapplying the $4,000, but

left the jury to determine the specific amount of this sum

that appellee had given to appellant. The court also in-

structed the jury that it could award punitive damages.‘

second contract wasn’t really a contract, it was just a piece

of paper that was going to [be] submitted to the bank. And

that also worried me... [b]ecause it was—it was just not as

truthful as it could be.”

* Appellee dropped one count for specific performance of

the contract before trial; the trial court directed a verdict for

appellant on two other counts of breach of contract to pur-

chase and interference with appellee’s contractual relation-

ship with Brooks.

* The court stated :

In addition to damages compensating Ms. Lee for de-

fendant’s breach of fiduciary duty as escrow agent, you

may but are not required to allow plaintiff punitive

damages if you find that the act of defendant of disburs-

[423]

A- 5

Appellant argues first that the contractual relation-

ship between escrow agent and depositor does not permit

an award of punitive damages as a remedy for breach.

We disagree. Appellee’s claim sounded not in contract

but in tort based upon the special relationship between

escrow agent and depositor. Although punitive damages

generally are not recoverable for breach of contract, e.g.,

Brown v. Coates, 102 U.S. App. D.C. 300, 303, 253 F.2d

36, 39 (1958); 5A CORBIN, CONTRACTS $ 1077 (1964) ;

Sullivan, Punitive Damages in the Law of Contract: The

Reality and the Illusion of Legal Change, 61 MINN. L.

REV. 207 (1977) [hereinafter cited as Sullivan], this rule

is inapplicable if there exists an independent fiduciary

relationship between the parties. Brown v. Coates, supra,

102 U.S. App. D.C. at 304-05, 253 F.2d at 40-41 (real

estate broker has fiduciary relationship independent of

ing the $4,000 deposit or part thereof in breach of his

fiduciary duty as an escrow agent was willful, wanton or

in reckless disregard of plaintiff’s rights. Punitive dam-

ages are awarded to punish willful and outrageous con-

duct and thus to deter others from the commission of

like acts. An act is wanton and reckless when it is done

in such a manner and under such circumstances as to

show intentional wrongdoing and a conscious disregard

of the result upon the rights of others that may flow

from the doing of the act. However, punitive damages

may not be awarded for negligence, even gross negli-

gence. Punitive damages may not be awarded where an

act though willful in itself is committed in the honest

assertion of a supposed right or discharge of duty, or

without any evil or bad intention.

If you find that defendant breached his fiduciary duty

but that his conduct lacked any elements of intentional

wrongdoing or conscious disregard of plaintiff’s rights,

you may not award punitive damages.

[424]

A=C

Agent/principal contract); PGS Co. v. Merrill Lynch,

Pierce, Fenner & Smith, Inc., 417 F.2d 659, 663 (9th Cir.

1969) ‘punitive damages ™»v be awarded for breach of

fiduciary duty independent of breacyw of contract—causea

of action), cert. denied, 397 V.8. 91s 11970); Rova

Farms Resort, Inc. v. Investors Ins. Co. of America, 65

N.J. 474, 504, 323 A.2d 495. 511 (1974) (insurer's

wrongful failure to setts. vreacnes botn contractual and

fiduciary obligations) ; CALAMARI & PERILLO, CONTRACTS

§ 14-3 (1976) (punitive damages awarded where breach

of contract also involves violation of fiduciary duty) ,

Sullivan, supra at 226 (breach of duty created by fidu-

ciary relationship rather than contract permits recovery

of punitive damages!. The question is whether an

escrow/depositor relationship, regardless of contractual

underpinnings, fits within this special fiduciary category.

We hold that it does.

An escrow agent occupies a unique position in the

“triangular” relationship between purchaser and seller:

{T]he escrow holder is the dual agent of both

parties until the performance of the conditions

of the escrow agreement, whereupon he becomes

the agent of each of the parties to the transac-

tion in respect to those things placed in escrow

to which each party has thus become entitled.

Thus, when the conditions specified in the

escrow agreement have been fully performed, the

title to the premises passes to the purchaser and

title to the purchase money passes to the seller.

Thereupon, the escrow holder becomes the agent

of the purchaser as to the deed and of the seller

as to the money.

Ferguson v. Caspar, 359 A.2d 17, 20, 22 (D.C. 1976)

(footnote omitted). Absent forfeiture or settlement, an

[425]

A-7

escrow agent has no right to surrender the deposit. See

Cohn, Inc. v. Trawick, 60 A.2d 926, 927 (D.C. 1948).

Recognizing these significant obligations, courts and com-

mentators have described the escrow/depositor relationship

as fiduciary: “Certainly there can be no question as to the

existence of the fiduciary capacity in a case where the

agent has been entrusted with money to be used for a

specific purpose.” Hamby v. St. Paul Mercury Indem-

nity Co., 217 F.2d 78, 80 (4th Cir. 1954). See Red Lob-

ster Inns v. Lawyers Title Ins. Corp., 492 F. Supp. 933

941 (E.D. Ark. 1980) (‘Where a person acts as escrow

agent for parties to a land sale, he becomes agent of both

buyer and seller and this agency creates a fiduciary rela-

tionship”), rev’d in part on other grounds, 656 F.2d 381

(8th Cir. 1981) ; National Bank of Washington v. nquity

Investors, 81 Wash.2d 886. 910, 506 P.2d 20, 35 (19731

(en bane) (escrow agent occupies fiauciary relationship

to all parties to the escrow) ; Brean v. North Campbell

Professional Building, 26 Ariz. App. 381, 384, 548 P.2d

1193, 1196 (1976) (escrow agent has fiduciary relativi-

snip of trust anu confidence with parties to escrow and

must conduct transaction with scrupulous honesty, skill

and diligence) ; cf. Comment, The Improper Use of Tax

and Insurance Escrow Payments by Mortgagees, 25

CaTH. U.L. REv. 102, 118 (1975) (“the special deposit

for a specific purpose has both debt and trust charac-

ter’).

Appellee gave to appellant $4,000 to purchase a home

for her, entrusting to him money to be used for a spe-

gific purpose. Hamby v. St. Paul Mercury Indemnity Co.,

supra, 217 F.2d at 78, Notwithstanding any contractual

obligations,® appellaiu., as escrow agent, owed to appellee

5 Even if a contract did exist between appellee and appel-

lant, see supra, n. 3, our conclusion would not differ. As the

[426]

A-8

the duties of a fiduciary. Moreover, the trial court’s

finding of breach of fiduciary duty is also plainly correct.

Although appellee signed the contract of sale, settlement

dia not vecur, nor did forfeiture. Appellant had no right

to apply appellee’s deposit to the 1977 purchase for the

benefit of Brooks and Thigpen. See Cohn, Inc. v. Trawick,

supra, 60 A.2d at 926,

Appellant secondly contends that his conduct did not

warrant a jury finding of punitive damages. Punitive

damages may be awarded ‘“‘where the act of the defendant

is accompanied with fraud, ill will, recklessness, wanton-

ness, oppressiveness, willful disregard of the plaintiff’s

rights, or other circumstances tending to aggravate the

injury.” Remeikis v. Boss & Phelps, Inc., 419 A.2d 986,

992 (D.C. 1980), quoting Franklin Investment Co. v.

Homburg, 252 A.2d 95, 98 (D.C. 1969). See Bay General

Industries, Inc. v. Johnson, 418 A.2d 1050, 1058 (D.C.

1980). The trial court carefully instructed the jury as

to this standard. See supra, n.4). On this record, a jury.

could properly find that appellant, an attorney, willfully

disregarded appellee’s rights in using her deposit to pur-

chase for another a home in which she had lived and had

substantially improved in expectation of ownership. The

Circuit Court of Appeals’ admonition to a rea] estate

Circuit Court of Appeals said in Brown v. Coates, supra, 102

U.S. App. D.C. at 303, 253 F.2d at 39:

We believe the better view to be that in certain, nar-

rowly defined circumstances, where a breach of contract

merges with, and assumes the character of, a wilful tort,

calculated rather than inadvertent, flagrant, and in dis-

regard of obligations of trust punitive damages may be

assessed. In this view we are by no means alone. That

punitive damages have a proper place in a civil case as a

punishment of, and as a deterrent to, various forms of

wrongful behavior has long been recognized by the fed-

eral courts including this court. [Footnotes omitted].

[427]

A-9

broker applies equally to an escrow agent, and a fortiori

to an attorney:

[O]nce it has been shown that one trained and

experienced holds himself out to the public as

worthy to be trusted for hire to perform services

for others, and those so invited do place their

trust and confidence, and that trust is inten-

tionally and consciously disregarded . . . com-

munity protection, as well as that of the victim,

warrants the imposition of punitive damages.

Brown v. Coates, supra, 102 U.S. App. D.C. at 304, 253

F.2d at 40.

Affirmed.

[428]

A-10

DISTRICT OF COLUMBIA COURT OF APPEALS

No. 81-768

Arthur M. Wagman,

Appellant

Vv

Debra F. J. Lee,

Appellee

ORDER

On consideration of Appellant's

Petition for Rehearing or Rehearing en

Banc, ORDERED by the Merits Division that

Appellant's Petition for Rehearing is

denied.

Per Curiam

Entered April 22, 1983