A residential lease dated June 1, 2008, specified monthly rent of $10,000 and a term commencing October 1, 2008. It also included the following special stipulation:

At time of lease signing, tenant agrees to pay $6,500 prior to the end of June 2008, $3,500 on or before July 15, 2008, $10,000 August 31, 2008, and $10,000 September 30, 2008. These payments represent 1st month’s rent, last month’s rent, and security deposits. All payments will be made to Broker. $20,000 ($10,000 security deposit & $10,000 last month’s rent held in broker escrow) shall be dispersed to the Landlord at the time of move in. Both parties involved authorize the Broker to retain 1st month’s rent as leasing commission for this transaction.

The tenant died after making only the first two payments (a total of $10,000). The broker disbursed the $10,000 in the escrow account to himself, believing in good faith, based largely on verbal discussions with the landlord, that the first money in would constitute the commission. The landlord sued the broker for the $10,000, claiming it as the security deposit. The agent answered, denied liability and moved for summary judgment.

Though not involved in the case, I was aware of it and it intrigued me. Reading the various pleadings and briefs led me to conclude that the special stipulation was ambiguous as to the classification of the $10,000. I thought the chance of the broker’s winning summary judgment remote based on the applicable standard:

[F]irst, the trial court must decide whether the [contract] language is clear and unambiguous. If it is, the court simply enforces the contract according to its clear terms; the contract alone is looked to for its meaning. Next, if the contract is ambiguous in some respect, the court must apply the rules of contract construction to resolve the ambiguity. Finally, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and what the parties intended must be resolved by a jury.

Peaches Land Trust v. Lumpkin County School Board, 648 S.E.2d 464, 466 (Ga. App. 2007), quoting Holcim (US), Inc. v. AMDG, Inc., 265 Ga. App. 818, 596 S.E.2d 197). I thought the ambiguity remained for resolution by the trier-of-fact and that summary judgment for the agent was therefore not appropriate.

Perhaps the landlord had a stronger claim, however. Georgia Code Section 43-40-20 (e) imposes the following restriction upon a broker’s entitlement to funds held in trust:

A broker shall not be entitled to any part of the earnest money, security deposit, or other trust funds paid to the broker in connection with any real estate transaction as part or all of the broker’s commission or fee until the transaction has been consummated or terminated.

The regulations of the Georgia Real Estate Commission amplify this code section at 520-1-.08 (3) (d):

A broker who claims any part of the earnest money or other money paid to the broker in connection with any real estate transaction as part or all of the broker’s commission or fee shall be deemed by the Commission to have complied with O.C.G.A. Section 43-40-20 (e) if . . . in a lease or rental transaction, possession has been delivered to the tenant or . . . the broker has secured a written agreement, separate from the sales contract or lease agreement, signed by all parties having an interest in the transaction who have agreed that the broker is entitled to any commission.

Had I represented the landlord, I would have argued that this statute and regulation established a standard of care for the benefit of stakeholders in escrowed money, such as the landlord, and that the agent breached this standard by disbursing the funds, without a separate authorizing agreement, before the landlord delivered possession. This argument, to me, would have been the stronger argument on summary judgment.

Thoughts?