Roman v. Sage Title Group, LLC , 229 Md. App. 601 ( 2016 )

REPORTED
IN THE COURT OF SPECIAL APPEALS
OF MARYLAND
No. 40
September Term, 2014
ROBERT ROMAN
v.
SAGE TITLE GROUP, LLC
Woodward,
Berger,
Friedman,
JJ.
Opinion by Woodward, J.
Filed: September 27, 2016
*Judge Kathryn G. Graeff and Judge Kevin F.
Arthur did not participate in the Court’s
decision to designate this opinion for
publication pursuant to Md. Rule 8-605.1.
This appeal arises from the Circuit Court for Baltimore County, where appellant,
Robert Roman, filed claims for conversion and negligence against appellee, Sage Title
Group, LLC (ASage Title@). Roman is a bridge lender, providing Ainterest-only@ loans to
real estate developers to finance acquisition, construction, and renovation of properties that
are to be sold or refinanced. Sage Title is a real estate title company that conducts
residential and commercial closings. In his complaint, Roman alleged that Kevin Sniffen,
Sage Title=s branch manager for the Baltimore City office, converted $2,420,000 of
Roman=s funds that had been deposited into Sage Title=s escrow account to facilitate
financing for two real estate projects. Roman alleged that Sage Title was vicariously
liable for Sniffen=s conversion, and that Sage Title was directly negligent in allowing
Sniffen to disburse Roman=s funds, held in escrow, without Roman=s permission.
After a three-day jury trial, the circuit court granted Sage Title=s motion for
judgment on the negligence claim on the grounds that expert testimony was required to
establish Sage Title=s standard of care. The court allowed the conversion claim to go to
the jury, which found in favor of Roman in the amount of $2,420,000. Following the jury
verdict, Sage Title filed a motion for judgment notwithstanding the verdict (AJNOV@),
which the court granted on the grounds that the allegedly converted funds were
commingled with other funds in Sage Title=s escrow account, and thus the conversion claim
was barred as a matter of law.
On appeal, Roman presents two questions for our review, which we have slightly
rephrased:
1. Did the trial court err in granting Sage Title=s motion for JNOV
on Roman=s conversion claim?
2. Did the trial court err in granting Sage Title=s motion for
judgment on Roman=s negligence claim where the trial court
determined that expert testimony was required to prove Sage
Title=s negligence?
For the reasons set forth below, we answer the first question in the affirmative and
the second question in the negative, thus reversing in part and affirming in part the
judgment of the circuit court.
BACKGROUND
The background for this case is set forth in the background section of the circuit
court’s Memorandum Opinion and Order:
On April 3, 2009, [Roman] testified that he met with Mr.
Brian McCloskey, a builder, Mr. Kevin Sniffen, a branch manager
at [Sage Title=s] Baltimore City office, and Patrick Belzner, to
discuss an alleged false escrow scheme. With respect to this
scheme, [Roman] would place his money in [Sage Title=s] escrow
account for the purpose of showing liquidity in order for Mr.
McCloskey to obtain construction loans on two properties. [Roman]
was led to believe that the money he deposited into [Sage Title=s]
escrow account would remain his, and it was not at risk because he
was the only individual who would have access to it. Mr. Sniffen,
[Sage Title=s] employee, was the approved person and lawyer to
handle all of these transactions. [Roman] then deposited a total of
two million four hundred and twenty thousand dollars
($2,420,000.00) into [Sage Title=s] escrow account. A short time
later, Mr. Sniffen disbursed the funds pursuant to Mr. McCloskey=s
instructions. Mr. Sniffen was later fired by [Sage Title] on May 26,
2009 when he accepted two personal checks, which was against
[Sage Title=s] policy. In February 2012, Mr. Sniffen pled guilty to
wire fraud or conspiracy to commit wire fraud and he was also
disbarred.
[Roman] filed his Complaint in this matter on January 26,
2012, alleging three claims: (1) Conversion and Theft; (2)
2
Negligence; and (3) Accounting. [Sage Title] then filed its Answer
on March 14, 2012. Subsequently, [Sage Title] filed a Motion for
Summary Judgment on August 28, 2012, with [Roman] filing [his]
Opposition on September 24, 2012. [Sage Title=s] Motion was later
denied by the Court on October 17, 2012. After the Court’s ruling,
[Sage Title] filed a Motion for Reconsideration regarding the Court’s
Summary Judgment ruling. [Roman] filed [his] Opposition on
November 14, 2012. Similar to [Sage Title=s] Motion for Summary
Judgment, the Court denied [Sage Title=s] Motion for
Reconsideration on January 17, 2013.
[Roman=s] case then proceeded to a jury trial on August 6,
2013. At the beginning of trial, Roman dismissed all his claims
with prejudice against the other Defendant in this case, Covenant
Title Corp. [Roman] also informed the Court that he would not be
pursuing his Accounting claim. At the end of [Roman=s] case on
August 7, 2013, [Sage Title] made a Motion for Judgment, which
the Court reserved on. Subsequently, on August 8, 2013, at the
close of [Sage Title=s] case, [Sage Title] renewed its Motion for
Judgment. The Court granted [Sage Title=s] Motion with respect to
the Negligence claim, but denied the Motion with respect to the
Conversion claim. The trial concluded on August 8, 2013, with the
jury finding in favor of [Roman] in the amount of two million four-
hundred and twenty thousand dollars ($2,420,000.00).
[Sage Title] next filed [a] Motion for JNOV and Conditional
Motion for New Trial on August 19, 2013, with [Roman] filing [his]
Opposition on August 30, 2013. [Sage Title] subsequently filed a
Reply on September 10, 2013, and later, an Amended Memorandum
of Grounds and Authorities in Support of its Motions on September
3, 2013 [sic]. [Roman] then filed an Amended Memorandum of
Grounds and Authorities in Support of its Opposition on September
11, 2013. The Court then held a hearing on October 11, 2013 on
the Motions.
(Footnotes omitted).
The trial court entered its Memorandum Opinion and Order on February 28, 2014,
granting Sage Title=s JNOV motion on the grounds that Roman=s money was commingled
with other money in Sage Title=s escrow account, and thus Roman Acannot bring a
3
conversion claim.@ As a result, the court vacated the judgment in favor of Roman and
ordered that judgment be entered in favor of Sage Title. Roman filed his notice of appeal
on March 21, 2014. Additional facts will be set forth below as necessary to resolve the
questions presented.
STANDARD OF REVIEW
Maryland Rules 2-519 and 2-532 govern motions for judgment and JNOV,
respectively. The standard for reviewing the grant of a motion for judgment under Rule
2-519 is the same for reviewing the grant of a JNOV motion under Rule 2-532: we review
the grant of both motions de novo. UBS Fin. Servs., Inc. v. Thompson, 217 Md. App. 500,
514 (2014), aff=d, 443 Md. 47 (2015). In doing so, we view the evidence and the
reasonable inferences to be drawn from it in the light most favorable to the non-moving
party, and, uphold the grant of the motion Aonly when the evidence and permissible
inferences permit only one conclusion with regard to the ultimate legal issue.@ See Kleban
v. Eghrari-Sabet, 174 Md. App. 60, 86 (2007).
DISCUSSION
I. Conversion
Roman argues that the trial court erred in granting Sage Title=s JNOV motion on the
conversion claim, because the jury was presented with sufficient evidence to support the
verdict in Roman=s favor. According to Roman, the monies at issue in this case were
Asufficiently identifiable@ to allow the conversion claim to proceed, because the monies
were held in Sage Title=s escrow account for a particular purpose, and Sage Title=s detailed
records kept track of the escrow account=s deposits and disbursements. Roman claims
4
that, because funds in escrow accounts Abelong to the funds= original owners,@ even if such
accounts include other funds, that money is sufficiently segregated and identifiable to allow
for a conversion claim, given escrow account rules. According to Roman, even though
no Maryland decision Asquarely addresses the conversion of money@ held in escrow, this
Court should look to the Court of Appeals=s language referring to the Aconversion@ of
clients’ funds held in attorneys’ escrow accounts in a variety of attorney grievance cases.
Roman also urges this Court to look at cases in other jurisdictions where courts have
allowed conversion claims for money that is used for a specific purpose.
Roman next claims that, even if his funds were commingled with other funds, his
conversion claim is valid, because his money should have been segregated in a separate
escrow account, and thus the conversion occurred before the funds were commingled.
Roman concludes that a defendant in a conversion claim should not be able to Askirt
liability with a >commingling= defense if that defendant was the cause of the money being
wrongfully commingled in the first place.@1
Sage Title responds that the trial court correctly granted its JNOV motion on the
conversion claim, because commingled funds cannot be the subject of conversion. Sage
Title claims that, although there is an exception for Aspecific segregated or identifiable
funds,@ such exception is narrow and not applicable when the monies are commingled with
other funds. According to Sage Title, the monies in question here were Adoubly
1
We need not, and do not, address this additional argument, because we decide the
question presented in Roman=s favor on the first ground that he argues.
5
commingled,@ because they were commingled with other funds from the same projects, as
well as with the funds for all of Sage Title=s Baltimore clients. Sage Title disputes
Roman=s reliance on the attorney grievance cases, because those cases, (1) Ainterpret
Maryland Rules of Professional Conduct, not the common law of conversion,@ and (2)
concern attorney escrow accounts, which have particular rules that do not apply to Sage
Title=s escrow account. Sage Title concludes that the trial court’s decision comports with
the purpose of the rule against conversion claims for commingled funds, because given the
number of transfers and loan agreements between Roman and McCloskey for this project,
the money at issue here is difficult to track.
AConversion evolved from trover, which occurred where a defendant, a >finder of
lost goods[,] . . . refused to return them= to the plaintiff, the owner of the goods.@
Thompson v. UBS Fin. Servs., 443 Md. 47, 56 (2015) (alterations in original) (quoting
Lawson v. Commonwealth Land Title Ins. Co., 69 Md. App. 476, 480 (1986)). A[T]he action
and the tort have expanded beyond the case of lost goods and cover now nearly any
wrongful exercise of dominion by one person over the personal property of another . . . .@
Lawson, 69 Md. App. at 480. Historically, the tort of conversion was limited to tangible
property, but over the years has been broadened to include intangible property, so long as
Athe defendant converts a document that embodies the plaintiff=s right to the plaintiff=s
intangible property,@ such as a Astock certificate, a promissory note, or a document that
embodies the right to a life insurance policy.@ Thompson, 443 Md. at 57 (citations
omitted).
With respect to money, the Court of Appeals has stated that A[t]he general rule is
6
that monies are intangible and, therefore, not subject to a claim for conversion.@ Allied
Investment Corp. v. Jasen 354 Md. 547, 560, 564 (1999). One reason for the rule is that
money is often commingled: Aif a defendant maintains possession of the proceeds in
question, but commingles it with other monies, the cash loses its specific identity,@ and thus
would be considered intangible property. Id. at 566. Furthermore, a conversion action
Ais not maintainable for money unless there be an obligation on the part of the defendant to
return the specific money entrusted to his care@; otherwise, there is Aonly a relationship of
debtor or creditor,@ and a conversion action Awill not lie against the debtor.@ Lawson, 69
Md. App. at 482 (citations and internal quotation marks omitted).
In Jasen, the Court of Appeals also explained that there is an exception to the general
rule that money is not subject to a conversion claim:
An exception exists, however, when a plaintiff can allege
that the defendant converted specific segregated or identifiable
funds. This rule is well-synthesized in 1 Fowler V. Harper et al.,
The Law of Torts, ' 2.13, at 2:56 (3d ed. 1986), which notes that
conversion claims generally are Arecognized in connection with
funds that have been or should have been segregated for a
particular purpose or that have been wrongfully obtained or
retained or diverted in an identifiable transaction.@
354 Md. at 564-65 (emphasis added) (citations and internal quotation marks omitted).
Thus, according to the Court, money can be subject to a claim for conversion if Aa plaintiff
can allege that the defendant converted specific segregated or identifiable funds.@ Id. at
564.
Since Jasen, this Court has had occasion to consider a claim of conversion of money
in a variety of contexts. In Lasater v. Guttman, Lasater brought suit against her husband,
7
alleging that he had converted Aspecific, segregated, identifiable separate funds@ from the
couple=s joint checking account, maintained for household expenses, and spent these funds
Aon personal adventures, exotic merchandise and ill-advised real estate projects.@ 194 Md.
App. 431, 447 (2010). We held that the wife=s claim was precluded, because the wife did
not point to specific amounts that she deposited, nor did she assert that the husband spent
specific funds on non-household expenses. Id. at 447-48. We held that Aonce these
monies were commingled with the couple=s joint funds, they lost their separateness for
purpose of a conversion claim[,]@ and A[f]or this reason alone,@ the wife=s conversion claim
failed. Id.
In George Wasserman & Janice Wasserman Goldstein Family LLC v. Kay, real
estate investors brought a conversion claim against Jack Kay, the managing partner and
managing member of various real estate investment partnerships and limited liability
companies (ALLCs@), alleging that Kay unlawfully transferred investment funds to another
LLC. 197 Md. App. 586, 592, 597 (2011). According to the investors, the operating
agreements of the LLCs Acontained explicit requirements for company funds to be kept in
a bank account or a savings and loan account and to be either distributed to members, or
continued to be held as reserve funds[,]”and the partnerships had Aeither [] a written
provision for the safe-keeping and distribution or reserve of partnership funds substantially
identical to those of the [] LLCs.@ Id. at 597 (internal quotations omitted). We held that
the conversion claim could not stand, because the funds allegedly converted were not
Aspecific, segregated, or identifiable funds.@ Id. at 632.
8
Similarly, in John B. Parsons Home, LLC v. John B. Parsons Foundation, we held
that a conversion claim was not available, because the subject monies were commingled
with other funds. 217 Md. App. 39, 61-62 (2014). We noted that the plaintiff never
alleged that the monies at issue were Aspecific, segregated or identifiable funds,@ nor was
there an allegation that the funds Awere not subsequently commingled.@ Id. at 61.
Because approximately nine years passed between the commencement of the distribution
payments and the lawsuit, we affirmed the circuit court’s ruling that the passage of time
Ainevitably resulted in the commingling of funds.@ Id. at 62.
In sum, money that is commingled with other funds Aloses its specific identity[,]@
and thus there can be no claim for conversion. Jasen, 354 Md. at 566; see also John B.
Parsons Home, LLC, 217 Md. App. at 61. In cases where Maryland courts have precluded
claims for conversion of funds on the basis that the funds were commingled, the plaintiff
either never identified a specific dollar amount that was allegedly converted, or the
defendant had no obligation to return those funds in the first place. See Darcars Motors
of Silver Spring, Inc. v. Borzym, 379 Md. 249, 258 n.3 (2004) (ADarcars did not have an
obligation to return the specific bills used for the down-payment.@ (emphasis added));
Jasen, 354 Md. at 566-67 (AThe facts do not allege that [Jasen] received any identifiable
dollar amount of profits, assets, distributions, dividends, or other monetary award . . . .@
(emphasis added)); John B. Parsons Home, LLC, 217 Md. App. at 61-62 (A[T]he
Foundation failed to allege . . . that the distribution payments were ever >specific,
segregated or identifiable funds.’” (emphasis added)); Wasserman, 197 Md. App. at 632
(AOne cannot convert monies unless the monies alleged to have been converted are
9
>specific, segregated, or identifiable funds,= and the funds allegedly converted in this case
do not meet that test.@ (emphasis added)); Lasater, 194 Md. App. at 447 (A[Lasater] does
not maintain that these specific funds then were spent by Guttmann on non-household
expenses or that they otherwise were wrongfully converted.@ (emphasis added)); Lawson,
69 Md. App. at 483 (noting that no Aspecific assets or the proceeds of a specific account . . .
were wrongfully taken@ (emphasis added)).
No Maryland appellate opinion, however, has dealt with a claim of conversion of
money placed in an escrow account. Looking outside of Maryland for cases dealing with
escrow accounts, several jurisdictions have allowed conversion claims where the subject
of conversion was money that by agreement of the parties was to be placed in escrow, even
if the money was commingled with other funds or not placed in escrow at all. In Addie v.
Kjaer, the buyers agreed to purchase two parcels of land from the sellers, and as a part of
the purchase agreement, the buyers were to pay $1.5 million into an escrow account. 51
V.I. 463, 467-68 (D.V.I. 2009). When the purchase of the parcels was not completed,
A[t]he Buyers demanded the return of the Escrow Money. The Escrow Money was not
returned. This action ensued.@ Id. at 468. One of the buyers= claims was for conversion
against Kevin D=Amour, the president of the title company that managed the escrow
account. Id. at 467-68.
First, the U.S. District Court summarized the claim for conversion of money as it
applied to escrowed funds:
An escrow account is A[a] bank account, generally held in the
name of the depositor and an escrow agent, that is returnable to the
depositor or paid to a third person on the fulfillment of specified
10
conditions.@ Black=s Law Dictionary (8th ed. 2004). Escrow is
Aproperty delivered by a promisor to a third party to be held by
the third party for a given amount of time or until the occurrence
of a condition, at which time the third party is to hand over
the . . . property to the promisee.@ Id. Until the occurrence of
such a condition, legal title to the property remains in the
depositor. In re Mushroom Transp. Co., 382 F.3d 325, 338 n.9 (3d
Cir. 2004) (citation omitted; applying Pennsylvania law).
A[E]scrow agents owe their depositors a fiduciary duty to
disburse the deposits according to the terms of the escrow
agreement.@ Trw Title Ins. Co. v. Sec. Union Title Ins. Co., 153 F.3d
822, 829 (7th Cir. 1998) (citation omitted); see also John Deere Co.
v. Walker, 764 F. Supp. 147, 152 (D. Ariz. 1991) (A[T]he duties of
the escrow agent are defined by the written instructions given to the
escrow agent.@) (citations omitted). Thus, Aan escrow agent may be
guilty of conversion if it violates the escrow agreement, exercises
ownership without authorization, or acts in some other way that
is inconsistent with its express duties under the contract.@
Eckholt v. American Business Info., 873 F. Supp. 521, 523 (D. Kan.
1994) (applying Kansas law; citation omitted); see also 28 Am. Jur.
2d Escrow ' 30 (ASince the depositary is bound by the terms of the
deposit and charged with the duties voluntarily assumed by him or
her, liability attaches to him or her for failing to follow his or her
instructions, whether done deliberately or negligently.@) (footnotes
omitted).
Id. at 474-75 (emphasis added). The Court then held that, A[b]ecause D=Amour personally
released the Escrow Money in contravention of the express conditions of the Escrow
Agreement, . . . the Buyers have met their initial burden of showing that D=Amour
converted the Escrow Money.@ Id. at 479-80.
Similarly, in Amusement Industry, Inc. v. Stern, the U.S. District Court for the
Southern District of New York determined that the plaintiffs stated a viable claim for
conversion under New York state law, because the plaintiffs alleged that (1) they placed
the funds into escrow pursuant to an escrow agreement; (2) they Adid not give authority for
11
the money to be released”; (3) the defendants moved the money to another account; and
(4) the defendants used the money for an unauthorized purpose. 786 F. Supp. 2d 758, 782-
83 (S.D.N.Y. 2011). The District Court concluded that the conversion claim was proper,
because the plaintiffs Ahad a possessory interest in the [funds] and the defendants took
control of [those funds] without [the plaintiff=s] permission.@ Id. at 783. The District Court
determined that the defendants= argument that the funds were not sufficiently identifiable
because they were commingled was without merit, because the plaintiffs sought Athe return
of the specifically identified [funds] the plaintiffs placed in escrow, which was only to be
released if [the plaintiffs] gave [the] defendants the authority to do so.@ Id.; see also Rhino
Fund, LLLP v. Hutchins, 215 P.3d 1186, 1195-96 (Colo. App. 2008) (holding that the
plaintiff established the elements for a conversion claim by alleging that the defendant
wrongfully commingled money that should have been placed in an escrow
account A>thereby taking dominion over the funds,= which was underscored when [the
plaintiff=s] requests for the return of its money were refused@ by the defendant); Grand
Pacific Fin. Corp. v. Brauer, 783 N.E.2d 849, 857 (Mass. App. 2003) (holding that an
attorney and his firm were liable for conversion of funds that a lender had deposited into
the law firm=s escrow account, because Aan escrow holder=s unauthorized collection from
escrowed funds of a debt owed by a party to the escrow agreement[] would be a breach of
duty@) (citation and internal quotation marks omitted); Goodwin v. Alexatos, 584 So. 2d
1007, 1011 (Fla. App. 1991) (summarizing caselaw allowing for a conversion claim where
Aa lawyer wrongfully retained in his trust account money belonging to his client,@ or Awhere
money is wrongfully withdrawn from a bank account@).
12
In the case sub judice, we view the evidence in a light most favorable to Roman as
the non-moving party in Sage Title=s motion for JNOV. See Kleban, 174 Md. App. at 86.
Here, Roman=s funds were placed into an escrow account at Sage Title. Roman identified
$2,420,000 as the sum of three discrete payments by cashier=s checks: (1) a check for
$1,500,000, dated April 13, 2009; (2) a check for $220,000, dated April 20, 2009; and (3)
a check for $700,000, dated April 30, 2009. Roman admitted into evidence copies of these
checks, as well as their corresponding notations on Sage Title=s balance sheets. The
$1,500,000 check was identified as a deposit for McCloskey=s property located at 1100
Columbia Ave, York, PA, and the other two checks were identified as deposits for
McCloskey=s property located at Claires Lane, Baltimore, MD.
At their meeting on April 3, 2009, Sniffen, McCloskey, Belzner, and Roman agreed
that the aforementioned funds placed by Roman into Sage Title=s escrow account would
still belong to Roman and would be returned to him when the construction loan was
secured. Also, Roman would be the only person who would have access to his funds in the
Sage Title escrow account.
Michael Maddox, President of Sage Title, testified in his deposition that the escrow
account was different from Sage Title=s operating account, with the escrow account housing
other people=s money, while the operating account paid Sage Title=s rent, mortgage,
employees, and other expenses. Maddox testified further that Sage Title had one escrow
account for each of Sage Title=s offices, with all of the funds of every transaction going
through that office placed in that office=s one escrow account.
13
Maddox, however, testified that Sage Title accounted separately for each property
by generating Asingle ledger balance reports@ showing the transactions for each property.
Thus the single ledger balance report identified Roman=s checks totaling $2,420,000 by
reference/check number, the transaction date, the payee name and memo, the medium, the
cleared date, and the amount. The ledger balance report also identified money contributed
by other persons or entities to the two properties at issue.
Sniffen and Sage Title admitted that all of Roman=s funds were disbursed by the end
of May 2009, when the Sage Title Escrow account for the two properties was completely
emptied, and that Roman=s $2,420,000 was never returned to him.
Based on these facts, we conclude that, although Roman=s monies were placed with
other funds in Sage Title=s escrow account, the $2,420,000 deposited to that escrow account
was sufficiently specific, segregated, and identifiable to support a claim for conversion.
Roman identified the specific funds at issue through the three checks and the corresponding
notations on Sage Title=s ledger balance reports. In other words, Roman was able to
Adescribe the funds with such reasonable certainty that the jury may know what money is
meant.@ Jasen, 354 Md. at 565. The funds were segregated because, by agreement, the
funds were to be placed in an escrow account, belong to Roman, be accessible only by
Roman, and be returned to Roman. Finally, the funds were sufficiently identifiable,
because all of Roman=s monies were not returned by Sniffen to Roman, nor were they
disbursed with Roman=s permission. As a result, the Jasen test is met, and Roman=s
monies are the subject of a claim for conversion. See 354 Md. at 564-65.
14
Nevertheless, Sage Title argues that, even though the funds were in an escrow
account, those funds were commingled, because they were placed into an account with
other funds belonging to other persons or entities. According to Sage Title, such
commingling precludes a conversion claim for Roman=s funds. At oral argument before
this Court, when asked if the presence of any other funds in the escrow account prevented
Roman=s funds from being the subject of a claim for conversion, Sage Title answered in
the affirmative. We believe that such view of commingling of funds is too broad.
ACommingling of funds@ is defined as an A[a]ct of fiduciary in mingling funds of his
[or her] beneficiary, client, employer, or ward with his [or her] own funds.@ Commingling
of funds, Black=s Law Dictionary (6th ed. 1990).2 Commingling of funds, in our view,
does not occur when funds are placed in an escrow account to be disbursed only by
agreement, even if those funds are physically located in the same account with other funds.
In other words, if the funds, although physically mixed with other funds in an escrow
account, are still under the control of the owner or restricted in use by agreement with the
owner, commingling of such funds does not occur. Again, as the Court stated in Addie,
[e]scrow is property delivered by a promisor to a third party to be
held by the third party for a given amount of time or until the
occurrence of a condition, at which time the third party is to hand
over the . . . property to the promisee. Until the occurrence of such
a condition, legal title to the property remains in the depositor.
2
Similarly, in the tenth edition of Black=s Law Dictionary, Acommingling@ is
defined as “[a] mixing together; esp., a fiduciary=s mixing of personal funds with those of
a beneficiary or client.” Commingling, Black=s Law Dictionary (10th ed. 2014).
15
51 V.I. at 474-75 (citations and internal quotation marks omitted).3
Similarly, in the attorney grievance context, the Court of Appeals has characterized
as Aconversion@ an attorney=s wrongful conduct in diverting a client=s funds from the
attorney=s escrow account, where all clients= funds are placed. See, e.g., Attorney
Grievance Comm=n v. Cherry-Mahoi, 388 Md. 124, 135-36 (2005); Attorney Grievance
Comm=n v. McLaughlin, 372 Md. 467, 500 (2002); Attorney Grievance Comm=n v. Spery,
371 Md. 560, 571 (2002). We recognize that in those cases, the Court was not deciding
whether the elements of the tort of conversion had been established. These cases are
analogous, however, because the attorney placed various clients= funds in a single escrow
account, but maintained separate ledgers to track the funds associated with each account;
and the attorney had a duty to follow the client=s directions with regard to disbursing the
funds. See generally Md. Rule 16-601 et seq. To summarize, we will not bar a
conversion claim simply because funds were located in a single escrow account, without
looking at the purpose of the account, the duties of the account holder, and whether the
funds were sufficiently specific, separate, and identifiable.
II. Conversion: Sage Title=s Alternate Grounds
As stated earlier, the trial court granted Sage Title=s JNOV motion, vacating the
jury=s verdict in favor of Roman. Sage Title argues that the trial court’s JNOV can be
3
Furthermore, regardless of the transfers in and out of the escrow account for
McCloskey=s properties, Sniffen and Sage Title conceded at trial that all of the money in
the accounts for both properties was disbursed. As a result, there is no issue of
determining which funds were converted and which remained in the escrow account.
16
affirmed on alternative grounds. Specifically, Sage Title claims that it cannot be
vicariously liable for Sniffen=s conversion, because Sniffen=s criminal acts were outside of
the scope of his employment, did not benefit Sage Title, and were not foreseeable. Sage
Title also claims that Roman=s own conduct bars his conversion claim under the unclean
hands/in pari delicto doctrine.
In his reply brief, Roman responds that the trial court correctly determined that Sage
Title waived its respondeat superior claim Abecause it failed to raise any argument
regarding the foreseeability of Sniffen=s conduct[,]@ a fact that Roman says that Sage Title
conceded. If the respondeat superior claim is not waived, Roman claims that sufficient
evidence existed to present the claim to the jury, because (1) there was evidence that
Sniffen=s conduct of disbursing funds from the Sage Title escrow account served Sage
Title=s interest and was authorized; and (2) Sniffen=s conduct was foreseeable, because
Sage Title knew that Sniffen previously had violated Sage Title policy by accepting
personal checks.
As for Sage Title=s unclean hands/in pari delicto claim, Roman argues that this claim
is not preserved, because Sage Title did not raise it during its motion for judgment at the
close of all the evidence. Even if this claim is preserved, Roman asserts that Sage Title
must show that Roman Aactual[ly] participat[ed] in fraudulent or illegal conduct@ to invoke
the in pari delicto defense, and such participation is not supported by any evidence of a
scheme to defraud lenders.
Rule 2-532(a) states that Aa party may move for judgment notwithstanding the
verdict only if that party made a motion for judgment at the close of all the evidence and
17
only on the grounds advanced in support of the earlier motion.@ Id. (emphasis added).
Rule 2-519(a) states that a party, in making a motion for judgment, Ashall state with
particularity all reasons why the motion should be granted.@ Id. We have articulated the
purpose of the Aparticularity requirement@:
This requirement has important and salutary purposes. It
implements, on the one hand, a principle of basic fairness. A trial
judge must be given a reasonable opportunity to consider all legal
and evidentiary arguments in deciding what issues to submit to the
jury and in framing proper instructions to the jury. The other parties
must have a fair opportunity at the trial level to respond to legal and
evidentiary challenges in order (1) to make their own record on those
issues and (2) to devise alternative trial strategies and arguments
should the court grant the motion, in whole or in part. Allowing
these issues to be presented for the first time on appeal is also
jurisprudentially unsound, for it may well result in requiring a full
new trial that otherwise might have been avoided.
Kent Vill. Assocs. Joint Venture v. Smith, 104 Md. App. 507, 517 (1995). This Court has
held that Aupon >renewal= of a motion for judgment at the close of all the evidence, reference
to a memorandum, previously submitted to the court, which sets forth with particularity
the arguments in support of the motion is sufficient compliance with Maryland Rule 2-
519(a).” Laubach v. Franklin Square Hosp., 79 Md. App. 203, 216 (1989), aff=d, 318 Md.
615 (1990).
A. Scope of Employment
As an initial matter, we agree with Sage Title that it preserved its scope of
employment challenge. In its written Motion for Judgment, Sage Title argued that Sage
Title was not vicariously liable for Sniffen=s alleged conversion under a theory of
respondeat superior. According to Sage Title, the alleged conversion was not committed
18
within the scope of Sniffen=s employment, because (1) he violated company policy,
industry standards, and the law; and (2) his Aactions would not have been related to@ Sage
Title=s business. Sage Title incorporated its written motion into its oral motion for
judgment at the close of Roman=s case on August 7, 2013. The court reserved on Sage
Title=s motion for judgment, which Sage Title renewed at the close of its own case on
August 8, 2013. In its memorandum in support of its JNOV motion, Sage Title, reiterated
the scope of employment argument when it argued that Athe touchstones of respondeat
superior as a basis for liability are the foreseeability of the employee=s misconduct, coupled
with necessity that the misconduct serve some interest of the employer.@ Because Sage
Title raised the issue of whether Sniffen=s conduct fell within the scope of his employment
in its motion for judgment at the close of all the evidence and in its JNOV motion, the issue
is preserved under Rules 2-519(a) and 2-532(a).
Turning to the merits, however, we agree with Roman that sufficient evidence
existed to present the respondeat superior question to the jury. The Court of Appeals has
stated that
for an employee=s tortious acts to be considered within the scope of
employment, the acts must have been in furtherance of the
employer=s business and authorized by the employer. Ordinarily,
the issue of whether a particular act is within the scope of
employment is properly decided by a jury[][;] however, where there
is no conflict in the evidence relating to the question and but one
inference can be drawn therefrom, the question is one of law for the
court.
Barclay v. Briscoe, 427 Md. 270, 283 (2012) (citations and internal quotation marks
omitted). Regarding a forbidden or criminal act, A[t]he general rule is that an employer
19
cannot be held liable for the criminal acts of an employee, unless they were committed
during the course of employment and to further a purpose or interest, however excessive
or misguided, of the employer.@ Fearnow v. Chesapeake & Potomac Telephone Co. of
Md., 104 Md. App. 1, 51 (1995) (citations omitted), rev=d in part on other grounds, 342
Md. 363 (1996).
In the case sub judice, Maddox testified that Sniffen was hired Ato generate business,
process the business that he brought in, conduct settlements, oversee closings[, and]
oversee a staff for the office,@ and that Sniffen was Aauthorized to take deposits . . . and put
them into the escrow account . . . [and] sign checks and make disbursements from the
escrow account.@ Regarding the placement of Roman=s monies in Sage Title=s escrow
account, Sniffen Awas the approved person, lawyer, title person, together with Sage Title,
to handle these transactions.@
Susan Holler, the executive vice president of Sage Title, testified that Sniffen
violated Sage Title policy by accepting for deposit personal, uncertified checks in Alate
March or early April,@ before the April 3, 2009 meeting between Roman, McCloskey,
Belzner, and Sniffen. Maddox testified that he terminated Sniffen on May 26, 2009, after
Sniffen again accepted personal checks and overdrew the Sage Title escrow account, in
violation of Sage Title=s policy. Maddox conceded that the single ledger balance report
for one of the McCloskey=s properties documented Sage Title Group, LLC Settlement
Agents Fees in the amount of $850.00. Finally, the trial court submitted the issue of
Sniffen=s scope of employment to the jury with instructions on respondeat superior, scope
of employment, and respondeat superior for intentional torts. See Md. Civil Pattern Jury
20
Instructions 3:3B3:5 (4th ed. 2013).
Because Sniffen was authorized to receive and disburse funds from the Sage Title
escrow account in order to conduct Sage Title=s business, including the receipt and
disbursement of Roman=s funds, and Sage Title earned closing fees on the projects in
question, we conclude that a reasonable jury could find that Sniffen=s
misconductCdisbursing Roman=s funds pursuant to McCloskey=s instructions, instead of
returning the funds to Roman per their agreementCwas in Afurtherance of the employer=s
business and authorized by the employer.@ Barclay, 427 Md. at 283 (citations omitted).
Sniffen=s misconduct was also foreseeable, because Sage Title had knowledge that Sniffen
had previously violated Sage Title=s policy by accepting personal checks, and, as
articulated by the trial court, Sage Title Awas therefore put on notice that [] Sniffen may be
engaging in questionable conduct.@ Accordingly, the trial court did not err in holding that
the issue of Sniffen=s scope of employment was a jury question. See id. (stating that there
is no Aone inference [that] can be drawn@ from the evidence that would make the scope of
employment a question of law (citations omitted)).
B. Unclean Hands/In Pari Delicto
Sage Title argues that Roman=s conversion claim is barred by the doctrine of unclean
hands/in pari delicto, because Roman was aware that there was a false escrow scheme and
that AMcCloskey would be falsely representing to lenders that the money in [Sage Title=s]
escrow account was his@ money. The circuit court determined that Sage Title waived this
argument, because Sage Title Afailed to present it during its motion for judgment.@ The
court explained:
21
[I]n its written motion, [Sage Title] presented the argument that
[Roman=s] claim was barred by the doctrine of Aunclean hands,@ on
the grounds that he would not have had any damages if he gave [Sage
Title] closing instructions or had insisted on some restrictions as to
the use of his money. [Sage Title] did not present the instant argument
that [Roman] was aware of the false escrow scheme and that Mr.
McCloskey would be falsely representing to lenders that the money in
[Sage Title=s] escrow account was his.
Moreover, this precise argument was not made during [Sage
Title=s] oral Motion. . . .
Finally, [Sage Title] then renewed its motion at the close of all
evidence, but did not provide any additional argument on the issue of
unclean hands or in pari delicto.
In sum, the specific ground that [Sage Title] now presents with
respect to this defense was not presented in its written motion and
during its oral motion, as required by Rule 2-532(a). By failing to
present this argument, the purpose of the particularity requirement of
Rule 2-519 is not fulfilled. [Sage Title] presented to the Court in its
motion for judgment that [Roman] had unclean hands, because he was
essentially negligent and did not have instructions on his money or
involve his lawyer. However, the Court was not presented with the
argument that [Roman] was aware of the fraudulent nature of the
scheme, which therefore prevented the Court from evaluating this
specific argument. As a result, the Court finds that [Sage Title]
waived this argument.
(Emphasis in original) (footnotes omitted).
We agree with the trial court that Sage Title waived its unclean hands/in pari delicto
defense, because the grounds for this defense in Sage Title=s JNOV motion were distinct
from its grounds for this defense in its motion for judgment. Because a party may only
base its JNOV motion on grounds that were advanced in support of its earlier motion for
judgment, we hold that Sage Title waived its unclean hands/in pari delicto defense. See
Md. Rule 2-532(a).
22
III. Negligence: Expert Testimony
Finally, Roman argues that the trial court erred in granting Sage Title=s motion for
judgment on Roman=s negligence claim because of a lack of expert testimony to establish
Sage Title=s standard of care. Roman asserts that Aan unauthorized transfer of someone
else=s money is so obviously negligent that expert testimony is clearly not necessary to
establish that.@ In addition, Roman claims that ASage Title simply had no policies, no
procedures, no guidelines and no safeguards in place to prevent the unauthorized
disbursement of funds[,]@ and thus expert testimony was unnecessary to establish that Sage
Title Ashould have done something to safeguard the money@ in its escrow account.
(Emphasis in original).
Sage Title responds that the trial court properly granted judgment on Roman=s
negligence claim, because Roman did not designate an expert on the standard of care or
identify any standard that would have prevented the loss. According to Sage Title, Roman
was required Ato present affirmative evidence of the standard of care, not speculation that
the standard of care required Sage Title to adopt some unidentified standard for Roman=s
protection that would have prevented the loss.@ (Emphasis in original).
The Court of Appeals set forth the rules regarding expert testimony to establish a
standard of care in Jones v. State:
[W]here the plaintiff alleges negligence by a professional,
expert testimony is generally necessary to establish the requisite
standard of care owed by the professional. The rule, derived to a
large degree from medical malpractice cases, is that experts are
usually necessary to explain professional standards because such
standards require specialized knowledge within the professional=s
field that are generally beyond the ken of the average layman. If
23
the plaintiff presents no expert when one is needed, then the trial
court may rule, in its general power to pass upon the sufficiency of
the evidence, that there is not sufficient evidence to go [to] the jury.
We have emphasized, though, that experts are not needed
when the alleged negligence is so obvious that the trier of fact could
easily recognize that such actions would violate the applicable
standard of care. If a jury can use its common knowledge or
experience to recognize a breach of a duty, then expert testimony is
unnecessary to calibrate the exact standard of care owed by the
defendant.
425 Md. 1, 26-27 (2012) (citations and internal quotation marks omitted).
Three Maryland cases that addressed the need for expert testimony in the context of
a bank’s standard of care are instructive to the case sub judice. In the first case, Free State
Bank & Trust Co. v. Ellis, this Court held that expert testimony was not required to establish
the bank’s standard of care, because Athe average juror would know without expert
testimony that banks simply do not ordinarily do what [Free State Bank] did in this case.@
45 Md. App. 159, 164 (1980), cert. denied, 288 Md. 374 (1980). Ellis had obtained a loan
from Free State Bank for $300,000 after providing as collateral (1) a second mortgage on
his home, and (2) a promissory note for $200,000, payable to Ellis by Wolman and secured
by a second mortgage on Wolman=s home. Id. at 160. When Wolman approached Ellis
for a release of the promissory note so that he could sell his home, Ellis directed Wolman
to Awork it out with the Bank, and that anything they agreed to do would be all right with
him so long as he remained secured.@ Id. at 160-61. Free State Bank accepted a
Awraparound deed of trust@ and promissory note for $160,000 as collateral for the loan to
Ellis in place of the $200,000 collateral previously posted. Id. at 161. The new
promissory note was payable to Wolman by the Palmers, the purchasers of Wolman=s
24
home. Id. Wolman endorsed the Palmer note to Free State Bank Afor collection.@ Id.
Thereafter, payments on the Palmer note were credited to Wolman=s account at Free State
Bank. Id.
When he found out about the substitution of collateral, Ellis sued Free State Bank
for negligence, among other claims. Id. at 162. At trial, Ellis did not introduce expert
evidence (or any evidence at all) regarding the standard of care to which the Bank was
held. Id. The jury found for Ellis on the negligence count in the amount of $80,000. Id.
On appeal, we held:
Certainly, no expert testimony was needed to show that banks
do not ordinarily release the collateral of a customer and take in
substitution thereof a paper writing which is not collateral, and
which does no more than allow the bank to collect monies due
on the collateral and credit it to the account of another. No
expert testimony is needed to show the jurors that banks do not
ordinarily release a deed of trust that secures a $200,000 promissory
note payable to the bank’s customer and which has been assigned to
the bank as collateral for the customer=s loan, and accept as substitute
collateral a note secured by a deed of trust, payable to a party other
than the bank’s customer, and which is not even assigned to the bank,
except, for all practical purposes, for collection. No expert
testimony is needed to demonstrate to the jury that by doing what it
did in the instant case, the Bank stripped its customer of his security
for a $200,000 loan to another party.
Id. at 163 (emphasis added). We concluded by noting that, Aeven if expert testimony is
ordinarily needed to prove the standard of reasonable care used by banks in the community
in its dealings with its customers,@ no expert testimony was required to demonstrate Free
State’s negligence under the facts at hand. Id. at 164.
We returned to the issue of expert testimony and a bank’s standard of care in Saxon
Mortgage Services, Inc. v. Harrison where we held again that expert testimony was not
25
necessary under the facts of that case. 186 Md. App. 228, 291 (2009). The Joint
Insurance Association had issued a check in the amount of $140,000 to Harrison and Saxon
Mortgage Services (SMS), among other parties, after Harrison had submitted a property
insurance claim. Id. at 236. The check was hand-delivered to Harrison, who apparently
endorsed the check to the law firm of Dunlap Grubb Weaver and Whitbeck, P.C. (Athe
Dunlap firm@). Id. at 236-37. The Dunlap firm then endorsed the check for deposit to
Middleburg Bank, where it was accepted. Id. The back of the check contained the
following instruction above the indorsement line: AAll Payees must endorse below exactly
as written on the face of the check.@ Id at 290. Although SMS neither endorsed the check
nor authorized any person to endorse the check on its behalf, the word ASaxon@ was
handwritten on the back of the check. Id.
SMS filed suit for conversion and negligence. Id. at 238. A bench trial was held,
and the trial court granted Middleburg Bank’s motion for judgment on the negligence claim
on the grounds that SMS Afailed to offer any evidence of banking industry standards
through expert testimony.@ Id. at 234, 286-87. We reversed the judgment in favor of
Middleburg Bank, because the instructions on the back of the check, as well as Middleburg
Bank’s own training guidelines, provided that a payee Ashould endorse its name exactly as
it appears on the front of the check.@ Id. at 290. We noted that, Awhile a bank=s own
procedures cannot in and of themselves be equated with reasonable commercial standards,
a bank’s failure to follow its own normal procedures is indicative of a failure to act in
accordance with reasonable commercial standards.” Id. at 290 (quoting Inventory Locator
Serv., Inc. v. Dunn, 776 S.W.2d 523, 526-27 (Tenn. Ct. App. 1989)). Accordingly, we
26
held that the issue of whether the bank violated a standard of care because it failed to follow
its own procedures, as well as the check=s express instructions, was not Aso particularly
related to some science or profession that is beyond the ken of the average lay[person,]@
and thus expert testimony was not required. Id. at 290-91 (alteration in original) (citations
and internal quotation marks omitted).
Finally, in Schultz v. Bank of America, the Court of Appeals held that expert
testimony was required to establish a bank’s standard of care when adding a customer to
an account. 413 Md. 15, 27 (2010). Schultz, as personal representative of his father=s
estate, brought suit against Bank of America, alleging that the Bank acted negligently when
it added Holbrook=s name to Schultz=s father=s checking account and allowed her to
withdraw funds from the account. Id. at 18-20. The Bank moved for judgment at the
close of Schultz=s case and at the close of all the evidence; the trial court denied both
motions, and the jury found in favor of Schultz. Id. at 20.
On appeal, the Court noted that, although Aexpert testimony is generally necessary
to establish the requisite standard of care owed by the professional[,]@ such testimony is
not needed when Athe alleged negligence, if proven, would be so obviously shown that the
trier of fact could recognize it without expert testimony.@ Id. at 28-29. The Court cited
with approval this Court’s holdings in Saxon and Free State, summarizing them as standing
Afor the proposition that expert testimony may sometimes be unnecessary@ when a bank’s
negligence is obvious. Id. at 30-31. In a similar vein, the Court discussed Taylor v.
Equitable Trust Company, 269 Md. 149 (1973). Id. at 31. The Court of Appeals
observed that, although it had not addressed the necessity of expert testimony in Taylor,
27
such testimony Amay not have even been necessary, due to the seemingly obvious nature
of the bank’s negligence. The Court explained that there was >no doubt= the bank was
negligent when it transferred funds without determining whether the transfer was
authorized[,]@ especially given the bank’s testimony Athat written instructions from the
customer were >customarily required= before making this sort of transfer.” Schultz, 413
Md. at 31, 31-32 n.12 (citing Taylor, 269 Md. at 158).
The Court summarized Schultz=s negligence claim as the Bank failing Ato properly
add Holbrook to the account@ and to verify the identities of Holbrook and Schultz=s father.
Schultz, 413 Md. at 33. The Court held that expert testimony was required to establish the
Bank’s standard of care in such situation, because Awe cannot say with any certainty that
most people have added someone=s name to their bank accounts[,]@ and even if that were
the case, Athe relevant activity in this case was by the bank itself, not a bank customer.@
Id. at 34. The Court noted that the process of adding an individual to a bank account Amay
occur behind closed doors, out of the sight of the customer, and may involve numerous
unknown procedures. To explain this process, a plaintiff must produce expert testimony
from someone familiar with the process from a bank’s perspective.@ Id. at 35. Finally,
the Court stated that banking procedures are rapidly changing due to new technology, and
thus Amay not be the same today as they were just a few years ago, which also means that
an expert may be necessary to explain to the trier of fact what duty a bank owes to a
customer.@ Id. (footnote omitted).
In the case sub judice, Roman=s negligence claim is based on his allegation that Sage
Title negligently (1) Aallow[ed] Sniffen to withdraw . . . Roman=s Sage Title funds from the
28
Sage [Title escrow] account[,]@ (2) Afail[ed] to institute proper procedures and safeguards
to insure that its employees did not utilize funds entrusted to Sage [Title] for purposes other
than@ those agreed upon by Roman, and (3) Aallow[ed Sniffen] . . . to remove trust funds in
[Sage Title=s] possession and control for any purpose without the consent of the person or
entity who had deposited the funds with Sage [Title].@
We conclude that expert testimony was required to establish Sage Title=s negligence,
because most lay people are not familiar with the operation of escrow accounts, nor with
any standard of care a title company owes to individuals or entities who are not customers,
but who deposit funds in escrow with the title company. Similar to the facts in Schultz,
Sage Title=s procedures and safeguards would Aoccur behind closed doors, out of the sight
of the customer, and may involve numerous unknown procedures@ that are “beyond the ken
of the average layperson.” See id. at 30, 35 (quoting Saxon, 186 Md. App. at 290-91).
In Saxon and Free State, where expert testimony was Aunnecessary for the trier of
fact to appreciate a bank’s duty to its customers . . . each bank committed an act that was
so obviously negligent that the trier of fact could recognize that the bank had violated its
duty to the plaintiffs without the aid of expert testimony.@ Schultz, 413 Md. at 30-31
(footnote omitted). Here, it was not Aso obvious[]@ that, when Sage Title disbursed the
funds per the instructions of its customer, McCloskey, it was violating a duty it owed to
Roman, who was not its customer. See id. at 29. The parties in this case also were
sophisticated developers accustomed to working with title companies and multiple parties
to move large sums of money in and out of escrow accounts; the standard of care for title
companies in such circumstances is unknown to the average juror.
29
Lastly, Roman=s argument that expert testimony is not required on the grounds that
Sage Title had “no policies, no procedures, no guidelines and no safeguards in place” is
without merit, because the jury still did not know whether the standard of care required
Sage Title to have any policy at all. Expert testimony was required to show the need for
such policies in the first place, as well as what those policies should provide. As a result,
expert testimony was necessary to establish the duty that Sage Title owed to Roman, and
the trial court did not err in granting Sage Title=s motion for judgment on Roman=s
negligence claim.
JUDGMENT OF THE CIRCUIT COURT FOR
BALTIMORE COUNTY AFFIRMED IN PART
AND REVERSED IN PART; CASE REMANDED
TO THE CIRCUIT COURT FOR FURTHER
PROCEEDINGS CONSISTENT WITH THIS
OPINION; COSTS TO BE DIVIDED EQUALLY
BETWEEN THE PARTIES.
30