Miller v. Craig - 27 Ariz. App. 789, 558 P.2d 984 (1976)

Rule:

An escrow agent acts in a fiduciary capacity and must conduct the affairs with which he is entrusted with scrupulous honesty, skill, and diligence. With respect to those who have retained him, an escrow agent is a trustee and can properly execute his duties only as they are set out by the terms of the escrow agreement. Deviation from those terms without the mutual consent of the parties concerned will subject the agent to liability for damages caused by his departure.

Facts:

Plaintiff sellers agreed to sell their tavern to the buyer. The buyer later refused to perform, after placing $ 5,000 with the escrow agent. The buyer won the ensuing litigation, winning a judgment against the sellers for $ 5,000. The escrow agent released the $ 5,000 in his care to the buyer. The sellers, however, won a reversal of that suit on appeal. They, too, sought the $ 5,000 from the escrow agent, who had already given it away. The escrow agent was awarded summary judgment in the sellers' suit against him. The sellers appealed. 

Issue:

Did the escrow agent breach his duty when he released the earnest money in a manner unauthorized by the escrow agreement? 

Answer:

Yes.

Conclusion:

The court reversed on appeal, rendering judgment for the sellers. The court held that the escrow agent breached his fiduciary duty to the sellers in releasing the earnest money in a manner unauthorized by the escrow agreement. Instead, the agent should have obtained permission from the sellers or from a trial court to release the money to the buyer. To fail to obtain permission made the agent liable to the sellers.