Roman v. Sage Title Group, LLC

⁶⁰⁴ Woodward, J. 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 (“Sage Title”)- Roman is a bridge lender, providing “interest-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 (“JNOV”), 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? ⁶⁰⁵ 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) 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 Sum ⁶⁰⁶ mary 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 “cannot bring a 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 ⁶⁰⁷ 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 , 94 A.3d 176 (2014), aff'd, 443 Md. 47 , 115 A.3d 125 (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 “only 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 , 920 A.2d 606 (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 “sufficiently 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 that, because funds in escrow accounts “belong 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 “squarely addresses the conversion of money” held in escrow, this Court should look to the Court of Appeals’s language referring to the “conversion” of clients’ funds held in attorneys’ escrow accounts in a variety ⁶⁰⁸ 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 “skirt 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 “specific 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 “doubly 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) “interpret 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 MeCloskey for this project, the money at issue here is difficult to track. “Conversion evolved from trover, which occurred where a defendant, a ‘finder of lost goods[,] ... refused to return ⁶⁰⁹ them’ to the plaintiff, the owner of the goods.” Thompson v. UBS Fin. Servs., 443 Md. 47, 56 , 115 A.3d 125 (2015) (alterations in original) (quoting Lawson v. Commonwealth Land Title Ins. Co., 69 Md.App. 476, 480 , 518 A.2d 174 (1986)). “[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 , 518 A.2d 174 . Historically, the tort of conversion was limited to tangible property, but over the years has been broadened to include intangible property, so long as “the defendant converts a document that embodies the plaintiffs right to the plaintiffs intangible property,” such as a “stock certificate, a promissory note, or a document that embodies the right to a life insurance policy.” Thompson, 443 Md. at 57 , 115 A.3d 125 (citations omitted).

With respect to money, the Court of Appeals has stated that “[t]he general rule is that monies are intangible and, therefore, not subject to a claim for conversion.” Allied Investment Corp. v. Jasen, 354 Md. 547, 560, 564 , 731 A.2d 957 (1999). One reason for the rule is that money is often commingled: “if 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 , 731 A.2d 957 . Furthermore, a conversion action “is 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 “only a relationship of debtor or creditor,” and a conversion action “will not lie against the debtor.” Lawson, 69 Md.App. at 482 , 518 A.2d 174 (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 ⁶¹⁰ ed. 1986), which notes that conversion claims generally are “recognized 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 , 731 A.2d 957 (emphasis added) (citations and internal quotation marks omitted). Thus, according to the Court, money can be subject to a claim for conversion if “a plaintiff can allege that the defendant converted specific segregated or identifiable funds.” Id. at 564 , 731 A.2d 957 . Since Jasen , this Court has had occasion to consider a claim of conversion of money in a variety of contexts.

In Lasater v. Guttmann, Lasater brought suit against her husband, alleging that he had converted “specific, segregated, identifiable separate funds” from the couple’s joint checking account, maintained for household expenses, and spent these funds “on personal adventures, exotic merchandise and ill-advised real estate projects.” 194 Md.App. 431, 447 , 5 A.3d 79 (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 , 5 A.3d 79 . We held that “once these monies were commingled with the couple’s joint funds, they lost their separateness for purpose of a conversion claim[,]” and “[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 (“LLCs”), alleging that Kay unlawfully transferred investment funds to another LLC. 197 Md.App. 586, 592, 597 , 14 A.3d 1193 (2011). According to the investors, the operating agreements of the LLCs “contained 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 “either [ ] a written provi ⁶¹¹ sion for the safe-keeping and distribution or reserve of partnership funds substantially identical to those of the [ ] LLCs.” Id. at 597 , 14 A.3d 1193 (internal quotations omitted). We held that the conversion claim could not stand, because the funds allegedly converted were not “specific, segregated, or identifiable funds.” Id. at 632 , 14 A.3d 1193 .

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 , 90 A.3d 534 (2014). We noted that the plaintiff never alleged that the monies at issue were “specific, segregated or identifiable funds,” nor was there an allegation that the funds “were not subsequently commingled.” Id. at 61 , 90 A.3d 534 . 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 “inevitably resulted in the commingling of funds.” Id. at 62 , 90 A.3d 534 . In sum, money that is commingled with other funds “loses its specific identity[,]” and thus there can be no claim for conversion.

Jasen, 354 Md. at 566 , 731 A.2d 957 ; see also John B. Parsons Home, LLC, 217 Md.App. at 61, 90 A.3d 534 . 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, 841 A.2d 828 (2004) (“Darcars did not have an obligation to return the specific bills used for the down-payment.” (emphasis added)); Jasen, 354 Md. at 566-67 , 731 A.2d 957 (“The 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, 90 A.3d 534 (“[T]he Foundation failed to allege ... that the distribution payments were ever ‘specific, segregated or identifiable funds.’ ” (em ⁶¹² phasis added)); Wasserman, 197 Md.App. at 632 , 14 A.3d 1193 (“One cannot convert monies unless the monies alleged to have been converted are ‘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 , 5 A.3d 79 (“[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 , 518 A.2d 174 (noting that no “specific 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, “[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] 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 conditions.” Black’s Law Dictionary (8th ed. 2004).

Escrow is “property delivered by a promi-sor to a third party to be held by the third party for a given amount of time or until the occurrence of a ⁶¹³ 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). “[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) (“[T]he duties of the escrow agent are defined by the written instructions given to the escrow agent.”) (citations omitted). Thus, “an 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 (“Since 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, “[bjecause 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 “did not give authority for the money to be released”; (3) the defendants moved the money to another account; and (4) the defendants used the money for an unau ⁶¹⁴ thorized purpose. 786 F.Supp.2d 758, 782-88 (S.D.N.Y.2011). The District Court concluded that the conversion claim was proper, because the plaintiffs “had a possessory interest in the [funds] and the defendants took control of [those funds] without [the plaintiffs] 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 “the 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 “ ‘thereby taking dominion over the funds,’ which was underscored when [the plaintiffs] requests for the return of its money were refused” by the defendant); Grand Pacific Fin. Corp. v. Brauer, 57 Mass.App.Ct. 407 , 783 N.E.2d 849, 857 (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 “an 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 “a lawyer wrongfully retained in his trust account money belonging to his client,” or “where money is wrongfully withdrawn from a bank account”). 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 , 920 A.2d 606 .

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, ⁶¹⁵ 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 8, 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.

Maddox, however, testified that Sage Title accounted separately for each property by generating “single 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 ⁶¹⁶ 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 “describe the funds with such reasonable certainty that the jury may know what money is meant.” Jasen, 354 Md. at 565 , 731 A.2d 957 . 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 , 731 A.2d 957 . 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. “Commingling of funds” is defined as an “[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 ⁶¹⁷ 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. 51 V.I. at 474-75 (citations and internal quotation marks omitted). 3 Similarly, in the attorney grievance context, the Court of Appeals has