- November 01, 1989
- All Underwritten Companies
- Escrow Funds
We have recently received inquiries concerning the "appropriate procedures" to
follow when accepting Earnest Money Deposits in an escrow. The purpose of an
Escrow is to allow an intermediate party to act on behalf of others in order
to complete a transfer of interests. Ideally, the Escrow Agreement should provide
for all contingencies with little, if any, discretion on behalf of the Escrowee.
Accordingly, when the escrow provides for ?Money? deposits, we
must consider that such deposit be insufficient or refunded at a later date.
Therefore all Escrow Agreements which contemplate money deposits should provide
procedures in the event that the Escrowee receives "insufficient funds" as
a money deposit for escrow. The following procedures should be incorporated
into the Escrow Agreement to address such contingencies:
- Notification of the parties to the Escrow of your awareness of the insufficient funds as promptly as possible (telephone, etc.);
- Confirmation in writing of the aforesaid notification by personal delivery, registered US mail with return receipt requested and/or private mail services such as Federal Express, DHL, etc.; and,
- Document the file noting the method of immediate notice (i.e. telephone call) including the time, date and person to whom the notification was delivered and maintain copies of the confirming letters.
In addition, when money deposits are contemplated, provisions for refunding
a money deposit must be provided. Be sure to obtain written authorization from
the proper parties to the escrow transaction acknowledging releasing the Escrowee
of further liability upon return of the deposit as directed. In the event such
cannot be obtained, a deposit of funds in question can be made with the court
in an ?Interpleader Action:, whereby, the court will determine who is
the rightful owner of the funds in question. A party who commences an Interpleader
Action, in good faith, is generally entitled to attorney's fees with
regard to same. However, in order to avoid a confrontation at such time, the
Escrow Agreement should provide that the Escrowee's attorney's
fees, if any, under these circumstances be borne by the parties to the escrow.
Based upon the above foregoing it appears necessary that these concept should
be included and incorporated into all escrow instructions in which money deposits
In the event that you have any questions concerning the above or if I can be of more assistance with regard to same, please do not hesitate to contact me at your earliest convenience.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.