Filed
Washington State
Court of Appeals
Division Two
July 12, 2016
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
PROTERRA DEVELOPMENT VENTURES No. 47567-7-II
LLC,
Appellant,
v.
FIRST AMERICAN TITLE INSURANCE UNPUBLISHED OPINION
COMPANY, a California corporation,
SEVIER LLC, a Washington limited liability
company, BRUCE KIRSCHENBAUM and
CHRISTINA KIRSCHENBAUM, husband
and wife, PAUL AGEE and JANE AGEE,
husband and wife,
Respondents.
SUTTON, J. — Proterra Development Ventures LLC appeals the trial court’s order granting
First American Title Insurance Company’s (First American) motion for summary judgment and
dismissal of its claims. Proterra’s claims arise from a real estate purchase and sale agreement
where Proterra was the buyer and Sevier LLC was the seller of vacant land in Ridgefield. At
closing, the parties executed a holdback agreement to ensure that expenses to obtain final
engineering approval from the City of Ridgefield were paid. First American was the escrow agent
of the holdback account and was instructed to pay invoices as authorized only by Bruce
Kirschenbaum, the managing member of Sevier.
No. 47567-7-II
Proterra argues that (1) First American breached its fiduciary duty when an escrow agent
drafted the holdback agreement, (2) the holdback agreement is ambiguous, and (3) First American
dispersed funds without investigating the expenses. We affirm the trial court’s grant of summary
judgment in favor of First American and award First American its reasonable attorney fees and
costs on appeal.
FACTS
On October 18, 2005, Sevier executed the Vacant Land Real Estate Purchase and Sale
Agreement (REPSA) to sell vacant land in Ridgefield to Landmark Development LLC
(Landmark). Landmark assigned their interest to Proterra. First American was instructed by both
Sevier and Proterra to hold the escrow account and Ann Snyder was the escrow officer. The
RESPA provided that “[a]ll costs associated with progressing ‘Canyon’s Ridge’ through
Preliminary Plat and Final Engineering Approved status is the responsibility of [Sevier].” Clerk’s
Papers (CP) at 13.
On February 27, 2006, Proterra and Sevier executed the Escrow Instructions Vacant Land
(escrow instructions), which contained the following relevant instructions:
7. [Proterra] agrees jointly and severally with [Sevier] to pay [First American] all
costs, damages, judgments and expenses suffered, expended or incurred by [First
American] in connection with or arising out of this escrow, including, but not
limited to, reasonable attorney[] fees.
8. Any additional instructions given to [First American] herein shall be
presented in writing. [Proterra] and [Sevier] further understand that
contemporaneously herewith there may be instructions by third parties which are
necessary for the completion of this escrow and are, therefore, made a part hereof;
namely, such instructions as may be received from a lender, grantor, vendor, or
others, affecting the property which is the subject of this escrow.
CP at 23.
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On March 10, Kirschenbaum contacted First American to discuss a holdback agreement.
Snyder informed him of the provisions First American would require in a holdback agreement.
When the transaction closed on March 13, final engineering had not been completed on the project.
On March 13, contemporaneously with the closing of the transaction, Proterra and Sevier
executed the Escrow Holdback Account Agreement (“holdback agreement”) which, in entirety,
stated the following:
An escrow holdback account will be established on March 13, 2006
simultaneous to the closing (recording and funding) of the above referenced file
number. First American Title has agreed to be the custodian of the holdback
account for 60 days or through May 12, 2006.
The intention of the holding account is to ensure expenses incurred by
Sevier, L.L.C. to obtain final engineering approval from the City of Ridgefield for
the Canyon’s Ridge subdivision are paid.
Provisions
1. Funds to establish the account come from the proceeds to the transaction,
obtained through the closing process on March 13, 2006.
2. The account duration will not exceed 60 days or May 12, 2006.
3. The amount of the holdback from closing shall be $75,000.00.
4. Invoice(s) along with authorization to pay same may only be made to First
American Title by Seller, Bruce Kirschenbaum, Managing Member of Sevier, LLC.
5. Seller shall provide Buyer a final accounting of all invoices once final
engineering approval has been issued by the City of Ridgefield.
6. Any remaining account funds on May 12, 2006 shall be distributed to the Seller,
Sevier, LLC, in the form of cashiers [sic] checks or wire transfer.
CP at 28.
Cherilyn R. Costa, senior escrow advisor for First American, testified that First American
did not draft the holdback agreement because First American has a standard form and that “the
parties must have insisted on using their own.” CP at 57. Costa also testified that “[the holdback
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agreement] seem[ed] to contain the elements that [First American] would have had in [their]
standard agreement as a basic.” CP at 57.
On March 15, Kirschenbaum authorized First American to pay an invoice from Olson
Engineering, dated February 27, 2006, in the amount of $52,763.07. This invoice included
“charges from Nov-Jan” and noted, “Please see attached listing for a current breakdown of
charges.” CP at 65. However, Kirschenbaum did not send the breakdown of charges to First
American along with the authorization. First American paid this invoice as authorized on
March 15.
On March 26, Kirschenbaum authorized First American to pay a second invoice from
Olson Engineering, dated March 21, 2006, in the amount of $18,923.60. This invoice included
charges incurred in February and again noted that the breakdown of charges was attached, but the
record does not indicate whether Kirschenbaum sent the breakdown of charges to First American.
First American paid this invoice as authorized on March 28.
First American dispersed the remaining funds, in the amount of $3,313.33, to Sevier via
wire transfer on May 17, 2006. Prior to the disbursement of the balance, First American did not
do anything to determine if there were any remaining final engineering approval expenses.
Proterra’s complaint alleged that First American breached its fiduciary duty when it
negligently paid requested expenses unrelated to final engineering and sought damages of
$75,942.74 for costs incurred relating to final engineering expenses. First American moved for
summary judgment, arguing that an escrow agent’s duties are defined and limited by contract and
that it did not breach the escrow instructions as a matter of law.
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No. 47567-7-II
The trial court granted First American’s motion for summary judgment, dismissed
Proterra’s claims with prejudice, and awarded First American its attorney fees and costs. Proterra
appealed.
ANALYSIS
I. STANDARD OF REVIEW
We review summary judgment orders de novo and perform the same inquiry as the trial
court, viewing all facts and reasonable inferences in the light most favorable to the nonmoving
party. Elcon Constr., Inc. v. E. Wash. Univ., 174 Wn.2d 157, 164, 273 P.3d 965 (2012). Summary
judgment is appropriate only if “the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.” CR 56(c).
Where no dispute as to the material facts exists, summary judgment is proper. Elcon Constr., 174
Wn.2d at 165.
A material fact is one that affects the outcome of the litigation. Elcon Constr., 174 Wn.2d
at 164. The moving party bears the initial burden of establishing its right to judgment as a matter
of law. Geer v. Tonnon, 137 Wn. App. 838, 843, 155 P.3d 163 (2007). Once the moving party
satisfies its initial burden, the burden then shifts to the nonmoving party to show that a triable issue
exists. Geer, 137 Wn. App. at 843. If the nonmoving party “‘fails to make a showing sufficient
to establish the existence of an element essential to that party’s case, and on which that party will
bear the burden of proof at trial,’” then summary judgment is properly granted in favor of the
moving party. Geer, 137 Wn. App. at 843 (internal quotation marks omitted) (quoting Celotex
Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)).
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II. ESCROW AGENT’S FIDUCIARY DUTY
Proterra argues that there are genuine issues of material fact as to whether First American
breached its fiduciary duty to Proterra when an escrow agent drafted a holdback agreement that
was vague and one-sided, when the plain language of the holdback agreement is ambiguous, and
when First American dispersed funds without investigating the expenses. We disagree.
A. DUTY OF FIRST AMERICAN
A claim for breach of fiduciary duty requires (1) the existence of a duty owed, (2) breach
of that duty, (3) resulting injury, and (4) that the claimed breach proximately caused the injury.
Micro Enhancement Int’l, Inc. v. Coopers & Lybrand, LLP, 110 Wn. App. 412, 433-34, 40 P.3d
1206 (2002).
Proterra argues that Snyder, an escrow officer, is held to the standard of a reasonable
attorney and has a duty to use standard forms, citing Bowers v. Transamerica Title Insurance Co.,
100 Wn.2d 581, 675 P.2d 193 (1983). Proterra also argues that the language in the holdback
agreement should be construed against First American as the drafter of the agreement, particularly
when Snyder instructed Sevier as to what the agreement should contain. Finally, Proterra argues
that the plain language of the holdback agreement only gives First American the authority to pay,
not an obligation to pay. We disagree.
1. Duty in Drafting
The selection and drafting of escrow instructions is the work of lawyers and is not to be
performed by laypersons. Bowers, 100 Wn.2d at 586-87. The standards that govern attorneys also
apply to lay escrow agents who engage in the unauthorized practice of law. Bowers, 100 Wn.2d
at 588. A layman who attempts to practice law is liable for negligence. Bowers, 100 Wn.2d at
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No. 47567-7-II
586-87. The duties of an attorney practicing law are also the duties of one who without a license
attempts to practice law. Bowers, 100 Wn.2d at 587.
But Bowers is not analogous here because the use of standard forms is not a duty that an
escrow agent owes under Bowers. In Bowers, the lay escrow agent had a duty to inform plaintiffs
of the advisability of obtaining legal representation when she prepared the closing documents
including both the seller’s escrow instructions and the buyer’s escrow instructions. Bowers, 100
Wn.2d at 584. Proterra argues that Snyder’s communication with Kirschenbaum about First
American’s requirements for a holdback agreement constitutes the unauthorized practice of law
by Snyder. But Proterra offers no evidence that First American drafted the holdback agreement,
that they failed to protect one of the parties, or that the resulting agreement was vague or one-
sided. Without any evidence that Snyder or First American actually drafted the holdback
agreement, there is no evidence that Snyder engaged in the unauthorized practice of law.
2. Duty in Payment Instructions
The escrow agent’s duties and limitations are defined by the escrow instructions. Denaxas
v. Sandstone Court of Bellevue, LLC, 148 Wn.2d 654, 663, 63 P.3d 125 (2003). The tasks in the
instructions must be undertaken with “‘ordinary skill and diligence, and due or reasonable care.’”
Denaxas, 148 Wn.2d at 663 (internal quotation marks omitted) (quoting Nat’l Bank of Wash., v.
Equity Investors, 81 Wn.2d 886, 910, 506 P.2d 20 (1973)). In addition, the escrow agent, as a
fiduciary to all parties to the escrow “must conduct the affairs with which [it] is entrusted with
scrupulous honesty, skill, and diligence.” Denaxas, 148 Wn.2d at 663 (alteration in original,
internal quotation marks omitted) (quoting Nat’l Bank, 81 Wn.2d at 910). Further, Washington
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No. 47567-7-II
law does not impose a duty on escrow agents independent of the parties’ instructions. Denaxas,
148 Wn.2d at 663-64.
Washington follows the objective manifestation theory of contracts. Hearst Commc’ns,
Inc. v. Seattle Times Co., 154 Wn.2d 493, 503-04, 115 P.3d 262 (2005). When interpreting
contracts, the subjective intent of the parties is generally irrelevant if the intent can be determined
from the actual words used. Hearst, 154 Wn.2d at 504. We do not interpret what was intended to
be written but what was written, and we generally give words in a contract their ordinary, usual,
and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent.
Hearst, 154 Wn.2d at 504. Contractual terms are ambiguous if they are subject to more than one
reasonable interpretation when applied to a particular set of facts. Queen Anne Park Homeowners
Ass’n v. State Farm Fire & Cas. Co., 183 Wn.2d 485, 489, 352 P.3d 790 (2015), aff’d, 633 Fed.
Appx. 415 (9th Cir. 2016).
The holdback agreement required that invoices along with authorization to pay the invoices
may only be made to First American by Bruce Kirschenbaum and that any remaining funds on
May 12, 2006 shall be distributed to Sevier by cashier’s check or wire transfer. Therefore, the
holdback agreement is not ambiguous because there is only one reasonable meaning to the
instructions provided to First American.
While Proterra argues that First American only had authorization, without an obligation,
to pay the invoices directed by Kirschenbaum, authorization alone is sufficient when escrow agents
do not have a duty to interpret the parties’ instructions. Kirschenbaum authorized First American
to make two payments to Olsen Engineering and provided supporting invoices. First American
paid the invoices as authorized and distributed all remaining funds to Sevier via wire transfer, as
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instructed under the holdback agreement. Furthermore, First American may have been liable under
the terms of the holdback agreement if it had refused to make the authorized payments.
B. DISBURSEMENT OF FUNDS
Proterra argues that there are genuine issues of material fact as to whether First American
was negligent in paying bills unrelated to final engineering when it dispersed the funds without
any investigation as to the nature of the expenses and that First American was to distribute the
remaining funds only after Sevier provided Proterra with a final accounting of expenses. We
disagree.
An escrow agent or holder becomes liable to his principals for damage proximately
resulting from his breach of the instructions, or from his exceeding the authority conferred on him
by the instructions. Equity Investors, 81 Wn.2d at 910.
Although Proterra argues that First American had only the authority to pay and not an
obligation to pay, there is no instruction that imposes a duty upon First American to investigate or
otherwise authenticate the nature of the expenses paid. The unambiguous instructions provide
only that First American has the authority to pay invoices upon receipt of the invoice and
authorization to pay by Kirschenbaum. Additionally, while Proterra argues that when read “in
context,” First American was only authorized to distribute “remaining funds” after Sevier had
provided Proterra with a final accounting, this requirement was not contained in the instructions.
Br. of Appellant at 11.
First American was not instructed to withhold disbursement of funds pending a final
accounting. On the contrary, First American was instructed only to disperse any remaining funds
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to Kirschenbaum via cashier’s check or wire transfer on May 12, 2006. First American complied
with the unambiguous language of the holdback agreement.
ATTORNEY FEES
First American includes a request for reasonable attorney fees and costs under RAP 18.1
and argues that the escrow instructions provide that Proterra and Sevier agreed jointly and
severally to pay First American’s reasonable attorney fees and costs incurred in connection with
or arising out of escrow. We agree and award First American’s reasonable attorney fees and costs
on appeal.
Fees may be awarded where there is a contractual provision or statute for awarding such
fees. Thompson v. Lennox, 151 Wn. App. 479, 491, 212 P.3d 597 (2009). “‘A contractual
provision for an award of attorney fees at trial supports an award of attorney fees on appeal under
RAP 18.1.’” Thompson, 151 Wn. App. at 491 (quoting W. Coast Stationary Eng’rs Welfare Fund,
39 Wn. App 466, 477, 694 P.2d 1101 (1985)).
The escrow instructions provide that “[Proterra] agrees jointly and severally with [Sevier]
to pay Escrowee all costs, damages, judgments and expenses suffered, expended or incurred by
Escrowee in connection with or arising out of this escrow, including but not limited to reasonable
attorney fees.” CP at 23. They also contemplated additional instructions and provide that “any
additional instructions given to the Escrowee herein shall be presented in writing . . . [including]
instructions by third parties which are necessary for the completion of this escrow and are,
therefore, made a part hereof.” CP at 23. Thus, the holdback agreement is made a part of the
escrow instructions and the fee provision applies to award First American reasonable attorney fees
and costs.
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CONCLUSION
We hold that there are no genuine issues of material fact and affirm the trial court’s order
granting First American summary judgment. Proterra offers no evidence that First American
breached its fiduciary duty or engaged in the unauthorized practice of law when it failed to use
their standard form or when Snyder instructed Kirschenbaum as to its requirements for a holdback
agreement. Proterra also offers no evidence that Snyder actually drafted the agreement. We
further hold that First American’s duty was defined by the escrow instructions, the holdback
agreement is not ambiguous, and First American did not breach its duty when it complied with the
escrow instructions and paid invoices authorized by Kirschenbaum. We award First American’s
reasonable attorney fees and costs on appeal as they arise out of the escrow instructions.
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,
it is so ordered.
SUTTON, J.
We concur:
BJORGEN, C.J.
MAXA, J.
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