This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
" The depositary of an escrow is regarded as an agent of both obligor and obligee, and he can neither return the deed or other instrument to the former without the latter's consent, nor, save upon the fulfillment of the agreed conditions, deliver it to the latter without the former's consent."1 On the one hand, the obligor, or grantor, who has deposited such instrument with the holder in escrow, has no right to reclaim the same without the consent of the obligee or grantee.2 If the instrument deposited in escrow passes title to realty it is valid as against subsequent devisees of the grantor or his grantees without consideration.3 If the grantor subsequently obtains possession of abstracts of title," was said to be held in escrow. Hoyt v. McLagan, 87 la. 746; 55 N. W. 18.
13 Lehigh Coal & Iron Co. v. Steel Co., 91 Wis. 221, 225; 64 N. W. 746. The court gave as a reason that the acceptor "retained absolute control over them and could by keeping silent prevent their delivery for all time."
14 Farmer v. Marvin, 63 Kan. 250; 65 Pac. 221.
1 Davis v. Clark, 58 Kan. 100, 105;
48 Pac. 563; to the same effect are Cannon v. Handley, 72 Cal. 133; 13 Pac. 315; Grove v. Jennings, 46 Kan. 366; 26 Par. 738; Fred v. Fred (N. J. Eq.) , 50 Atl. 776; Shirley v. Ayers, 14 Ohio 307; 45 Am. Dec. 546; Gammon v. Bunnell, 22 Utah 421; 64 Pac. 958.
2Tharaldson v. Everts, 87 Minn. 168; sub nomine Thoraldsen v. Hatch. 91 N. W. 467.
3 Bury v. Young. 98 Cal. 446; 35 Am. St. Rep. 186; 33 Pac. 338.
the deed deposited in escrow,4 and even destroys it,5 the rights of the grantee in escrow are not thereby destroyed. On the other hand, the obligee or grantee under the instrument deposited in escrow, has no right to the custody of the instrument until the conditions of the deposit have been complied with, nor can the instrument take effect till then as between the parties.6 If the depositary of a deed in escrow delivers it to the grantee before the conditions of the escrow are complied with, such delivery is of no validity as between the grantor and the grantee.7 So delivery of a lease8 or mortgage9 which has been deposited in escrow is of no effect if delivered before the conditions have been complied with. So a mortgagee who has placed a release of a mortgage in escrow may enjoin the mortgagor from having it recorded before the condition on which it was delivered has been complied with.10 If the grantee under a deed deposited in escrow obtains it from the depositary by fraud, such deed is of no effect as between grantor and grantee.11 The same rule applies where it is taken without the knowledge of the depositary.12 Neither is it of any validity as against persons claiming under such grantee who are not bona fide purchasers for value.13 Whether such delivery is of any validity against bona fide purchasers for value, is a question upon which there is a conflict of authorities. Some authorities hold that such deed passes title as to bona fide purchasers for value ;14 others hold that it does not.15 So, if a non-negotiable contract, deposited in escrow, is delivered before the terms of the deposit are complied with, it is of no validity against the obligor.16 Where a deed has been improperly delivered by the depositary, the grantor may subsequently ratify such delivery.17 By remaining silent, and seeing third persons without knowledge of the facts alter their condition, in reliance upon the apparent delivery, he may estop himself to deny the validity of such delivery.18 So a promissory note deposited in escrow and delivered by the depositary before the terms of the delivery are complied with is invalid except when in the hands of a bona fide holder who acquires legal title for value and before maturity.16 In the hands of a bona fide holder, however, a negotiable instrument, wrongfully delivered by a holder in escrow, is valid.20 A depositary of a promissory note in escrow who delivers it before the conditions are complied with, in consequence of which the maker is obliged to pay the note to an innocent holder for value, is liable in damages to such maker.21 A party to a delivery in escrow, for whose benefit certain conditions were imposed, may, however, waive such conditions and allow the deed to be delivered without the performance thereof.22
4 Grove v. Jennings, 46 Kan. 366; 26 Pac. 738.
5Robbins v. Rascoe, 120 N. C. 79; 58 Am. St. Rep. 774; 38 L. R. A. 238; 26 S. E. 807.
6 Wilson v. Savings Association, 42 Fed. 421.
7Hogueland v. Arts, 113 la. 634; 85 N. W. 818; Jackson v. Rowley, 88 la. 184; 55 N. W. 339; Lewis v. Prather (Ky.) , 21 S. W. 538; Mat-teson v. Smith, 61 Neb. 761; 86 N. W. 472; Tyler v. Cate, 29 Or. 515; 45 Pac. 800; Landon v. Brown, 160 Pa. St. 538; 28 Atl. 921.
8 Gentry v. Gatlin, 14 Tex.
Civ. App. 419; 38 S. W. 223.
9Roberson v. Reiter, 38 Neb. 198; 56 N. W. 877.
10Matteson v. Smith, 61 Neb. 761; 86 N. W. 472.
11Hanley v. Sweeny, 109 Fed. 712; 48 C. C. A. 612; Burnap v. Sharpsteen, 149 Ill. 225; 36 N. E. 1008; Everts v. Agnes, 6 Wis. 453; affirming same case in 4 Wis. 343; 65 Am. Dec. 314.
12 Jackson v. Lynn. 94 la. 151; 58 Am. St. Rep. 386; 62 N. W. 704.
13 Roberson v. Reiter, 38 Neb. 198; 56 N. W. 877.
14Schurtz v. Colvin, 55 O. S.
274; 45 N. E. 527; Blight v. Schenck, 10 Pa. St. 285; 51 Am. Dec. 478; Everts v. Agnes, 4 Wis. 343; 65 Am. Dec. 314.
15 Dixon v. Bank, 102 Ga. 461; 66 Am. St. Rep. 193; 31 S. E. 96; Quick v. Milligan, 108 Ind. 419; 58 Am. Rep. 49; 9 N. E. 392; Jackson v. Lynn, 94 la. 151; 58 Am. St. Rep. 386; 62 N. W. 704; Tyler v. Cate, 29 Or. 515; 45 Pac. 800; Smith v. Bank, 32 Vt. 341; 76 Am. Dec. 179; Everts v. Agnes, 6 Wis. 453; affirming same case in 4 Wis. 343; 65 Am. Dec. 314. (In the case in 4 Wis. supra it did not appear definitely that the subsequent purchaser acted bona fide, in 6 Wis. supra the record showed him to be a bona fide grantee.)
16 Daniels v. Gower, 54 la. 319; 3 N. W. 424; 6 N. W. 525.
17 Dixon v. Bank, 102 Ga. 461; 66 Am. St. Rep. 193; 31 S. E. 96.
18 Dixon v. Bank, 102 Ga. 461; 66 Am. St. Rep. 193; 31 S. E. 96; Reese v. Medlock, 27 Tex. 120; 84 Am. Dec. 611.
19 Jamison v. McFarland, 10 S. D. 574; 74 N. W. 1033.
20 Schmid v. Frankfort, 131 Mich. 197; 91 N. W. 131; Chase National Bank v. Faurot, 149 N. Y. 532; 35 L. R. A. 605; 44 N. E. 164.
21 Riggs v. Trees, 120 Ind. 402; 5 L. R. A. 696; 22 N. E. 254.
22 Smith v. Goodrich, 167 Ill. 46; 47 N. E. 316; Tharaldson v. Everts, 87 Minn. 168; sub nomine Thoraldsen v. Hatch, 91 N. W. 467.