When a Principal Broker ( hereinafter called "Broker" ), has acted to represent one or both parties in a real estate transaction. In the course of the transaction the buyer has given the Broker earnest money to deposit in the Firm's escrow account. For some reason or another, the deal falls through. The buyer is now demanding that his earnest money be returned by the Broker and at the same time, the seller is demanding the earnest money be forwarded to him. The Broker is now in the middle of this situation and in a quandary as to what to do. If the money is disbursed to the wrong party then there may be liability on the part of the Broker to pay the other party if a court determines that the other party is entitled to the money.

The Interpleader Form for Knox County Session Court will enable a Broker holding earnest money deposits in dispute, to get out of the middle of the dispute and eliminate his legal exposure to either party by securing the assistance of the Knox County General Sessions Court to resolve the dispute between the buyer and seller.

The Broker holding a disputed deposit in escrow should file the Interpleader Form and a copy of the real estate sales contract together with the filing fee at the General Sessions ( Civil Sessions ) Court Clerk's office in the City-County Building on Main Avenue. The original of the Interpleader Form plus one copy for each defendant is filed with the General Sessions Court Clerk ( 5 copies ). The Clerk's staff will issue a summons to both the buyer and the seller and the Sheriff will assign a court date and time indicating when the trial will be held. The Sheriff will then serve the summonses on the buyer and the seller commanding them to appear on that date. The Sheriff should notify the Broker when to attend the trial in the event the Judge has questions regarding the dispute, but if he fails to do so within one week, the Broker should contact the Clerk's Office.

The Broker must pay a filing fee when the Form is filed with the General Sessions Court. The fees are $174.50 for two parties, add $22.50 for each additional party. (updated 12/08) A check for the fee should be made payable to "General Sessions Court". The fee may vary especially if the buyer and/or seller reside in different counties or out of state. These filing fees will be taxed as costs to the losing party and should be reimbursed to the Broker. These fees should be verified with the Court. However, reimbursement is not automatic. The Broker must request reimbursement of the filing fees.

The Broker must deposit the disputed earnest money with the court.

The Interpleader Form to be filed with the Court should be completed as follows:

1. Following the caption "Summon Defendants", place the Buyer's full name and address in the appropriate blanks.

2. Following the blank provided for the Buyer's address and ending with the word 'and', place the Seller's full name and address in the appropriate blanks.

3. The next set of blanks require entry of a court date and time which will be completed by the Sheriff when he serves the summonses on the buyer and seller.

4. Following the word "Plaintiff", place the Broker's own name and business address in the appropriate blanks.

5. In the only blanks in the second paragraph which begin with the words "WHEREBY, PLAINTIFF REQUESTS . . ", place the dollar amount in dispute by first writing out that amount ( e.g., Five hundred and no/100 ), and second by writing the actual numerals ( e.g., $500.00 ).

The Broker should complete no other blanks on this Form.

The Broker may take an extra copy of the Interpleader Form when filing the original and request the attending clerk to stamp the copy "filed". The Broker should retain this copy with the appropriate receipt(s) for record purposes.
THE INTERPLEADER WARRANT, BILL OF COSTS, AND JUDGMENT FORM

At the same time the Interpleader Form is filed (with the contract as an addendum) an Interpleader Warrant, Bill of Costs and Judgment Form must also be filed.

The blanks on this form will be completed by the General Sessions Judge.

When this process is completed, The Court will issued a petition to be served on both the Buyer and the Seller.

For the Broker's information the following is the Tennessee Statute and the Rules of the Tennessee Real Estate Commission authorizing the filing of the Interpleader petition.

TREC RULE 1260-2-.34 INTERPLEADER. "Actions in the nature of Interpleader, in which the value of money which is the subject of the action does not exceed the jurisdictional limit of General Sessions Court, may be filed in General Sessions Court pursuant to T.C.A. 16-15-731."

INTERPLEADER DEFINITION: A legal proceeding whereby an innocent third party (stakeholder), such as an escrow agent or broker, can deposit with the court property or money that he or she holds and that is subject to adverse claims so that the court can distribute it to the rightful claimant. The distribution of deposit or earnest money held in escrow is often a problem when the buyer and seller are in dispute over the purchase contract. If the escrow agent cannot get the parties to agree an the disposition of the deposit money, the recourse is to file an interpleader action asking the court to accept the money and distribute it to the rightful claimant. When the broker is holding the earnest money, the broker may originate the interpleader.

When a Principal Broker ( hereinafter called "Broker") has acted to represent one or both parties in a real estate transaction. In the course of the transaction the buyer has given the Broker earnest money to deposit in the Firm's escrow account. For some reason or another, the deal falls through. The buyer is now demanding that his earnest money be returned by the Broker and at the same time, the seller is demanding the earnest money be forwarded to him. The Broker is now in the middle of this situation and in a quandary as to what to do. If the money is disbursed to the wrong party then there may be liability on the part of the Broker to pay the other party if a court determines that the other party is entitled to the money.

The Interpleader Statute will enable the Broker holding the earnest money in dispute, to get out of the middle of the dispute and eliminate his legal exposure to either party, by securing the assistance of the General Sessions Court of the County to resolve the dispute between the buyer and seller by deciding who is entitled to the money.

The Broker holding a disputed deposit in escrow should file the Interpleader Form and a copy of the real estate sales contract together with the filing fee at the County's General Sessions Court Clerk's Office. The original of the Interpleader Form plus one copy for each defendant is filed with the General Sessions Court Clerk ( 5 copies ). The Clerk's staff will issue a summons to both the buyer and the seller and the Sheriff will assign a court date and time indicating when the trial will be held. The Sheriff will then serve the summonses on the buyer and the seller commanding them to appear on that date. The Sheriff should notify the Broker when to attend the trial in the event the Judge has questions regarding the dispute, but if he fails to do so within one week, the Broker should contact the Clerk's Office.

The Broker must pay a filing fee when the Form is filed with the General Sessions Court. A check for the fee should be made payable to "General Sessions Court". The Broker will need to contact the County's General Sessions Court Office for the amount of the fee. The fee may vary especially if the buyer and/or seller reside in different counties. These filing fees will be taxed as costs to the losing party and should be reimbursed to the Broker. However, reimbursement is not automatic, the broker must request it.

The Broker must deposit the disputed earnest money with the court.

THE INTERPLEADER FORM

1. At the top of the form type in the Name of the County on the line in front of the word " . County, Tennessee."

2. On the line above the Plaintiff, list the Firm's Name vs.

3. The First Defendant should be the Buyer then a comma,

4. The Second Defendant should be the Seller.

5. The General Sessions Court Clerk will assign a number to the petition and fill it in at the time it is filed.

6. At the top of the petition, under the State of Tennessee, you will find the words "County of ". Fill in the Name of the County on that line.

7. On the next line fill in the Name of Principal Broker of the Firm who is "being duly
sworn."

8. In Section I - Fill in the Name of the First Defendant, his Residence and Mailing Address.

9. In Section II - Fill in the Name of the Second Defendant, his Residence and Mailing
Address.

[ In both situations, the mailing address can be the same as the residential address.]

10. In Section III - Fill in the Amount of the Money that being held in escrow. Directly under the Amount of Money where it says "held according to the following" - explain that the money is held pursuant to a contract between the First Defendant and the Second Defendant. Also, state as follows: "a copy of the contract between the parties is hereto attached." Then, staple a copy of the sales contract to the petition.

11. In Section IV - use the language exactly as it is listed in this section of
the petition.

12. In Section V - Recite the Amount of Money paid into the court. This should be the
same amount as listed in Section III of the petition. Then, sign Your Name as the
Plaintiff and have the form notarized. Have the notary fill in the date, sign their name
and the date their commission expires.

This will complete the petition. Now complete "The Order for the Court."

THE ORDER FOR THE COURT FORM

At the same time the Interpleader Form is filed ( with the contract as an addendum ) an "Order For The Court" to sign must also be filed.

The blanks on this form will be completed by the General Sessions Judge.

Both Forms, the Interpleader Form" and the "Order For The Court Form" should be copied with one Form on the "front" and the other Form on the "back" of a single page.

When this is completed, the "Order For The Court" will be issued and the petition will be served on both the buyer and the seller.

If a General Sessions Court Clerk is not familiar with the Interpleader Form and procedure. Refer them to Tennessee Statute and the Rules of the Tennessee Real Estate Commission as authority to file the petition.

TREC RULE 1260-2-.34 INTERPLEADER. "Actions in the nature of Interpleader,
in which the value of money which is the subject of the action does not exceed the jurisdictional limit of General Sessions Court, may be filed in General Sessions Court pursuant to T.C.A. 16-15-731."

INTERPLEADER DEFINITION: A legal proceeding whereby an innocent third party (stakeholder), such as an escrow agent or broker, can deposit with the court property or money that he or she holds and that is subject to adverse claims so that the court can distribute it to the rightful claimant. The distribution of deposit or earnest money held in escrow is often a problem when the buyer and seller are in dispute over the purchase contract. If the escrow agent cannot get the parties to agree an the disposition of the deposit money, the recourse is to file an interpleader action asking the court to accept the money and distribute it to the rightful claimant. When the broker is holding the earnest money, the broker may originate the interpleader.

Tennessee Real Estate Commission

Rule 1260-2-.09 Deposits and Earnest Money:

1. Each broker shall maintain a separate escrow account for the purpose of holding any funds which may be received in his fiduciary capacity as deposits, earnest money, or the like.

2. An affiliate broker shall pay over to the broker with whom he is under contract all deposits and earnest money immediately upon receipt.

3. Brokers are responsible at all times for deposits and earnest money accepted by them or their affiliate brokers.

4. Where a contract authorizes a broker to place funds in an escrow or trustee account, the broker shall clearly specify in the contract:

(a) the terms and conditions for disbursement of such funds; and

(b) the name of the person or entity who will actually hold such funds.

5. A broker may properly disburse funds from an escrow or trustee account:

(a) upon a reasonable interpretation of the contract which authorizes him to hold such funds;

(b) upon securing a written agreement which is signed by all parties having an interest in such funds, and is separate from the contract which authorizes him to hold such funds;

(c) at the closing of the transaction;

(d) upon the rejection of an offer to purchase, sell, rent, lease, exchange, or option real estate;

(e) upon the withdrawal of an offer not yet accepted to purchase, sell, rent, lease, exchange or option real estate;

(f) upon filing an interpleader action in a court of competent jurisdiction; or

(g) upon the order of a court of competent jurisdiction.

6. Funds in escrow or trustee accounts shall be disbursed or interpled in a proper manner without unreasonable delay and not longer than thirty (30) days after receipt of a written demand from any party to the transaction. A broker may continue to hold such funds beyond thirty days only if the broker obtains an agreement signed by all parties to the transaction permitting the broker to continue to hold such funds in escrow and such agreement:

(a) Clearly provides that the broker may interplead the funds at any time regardless of any other term contained in the agreement; and

(b) Contains a definite termination date upon which the broker shall disburse or interplead the funds.

7. No postdated check shall be accepted for payment of a deposit or earnest money, unless otherwise provided in the offer.

8. Earnest money shall be deposited into an escrow or trustee account promptly upon acceptance of the offer, unless the offer contains a statement such as "Earnest money to be deposited by . . ." to indicate how such funds will be handled pending closing of the contract.

( TREC Policy Note: "Promptly" means within seventy–two { 72 } hours or three

{ 3 } Banking Days of acceptance of the offer. )

9. Interest bearing escrow accounts are neither required nor prohibited. If used, however, the following guidelines shall be observed:

(a) The licensee shall disclose to the payor that his funds will be placed in an interest bearing escrow account;

(b) As a depositor of the funds, the licensee does not own the funds or any interest earned thereon until properly disbursed to the licensee;

(c) The licensee and payor shall execute a written agreement indicating the manner of disposition of interest earned; and

(d) The licensee shall keep a detailed and accurate accounting of the precise sum of the interest earned for each separate deposit.

The Tennessee Real Estate Commission's interpretation of the way to resolve a dispute under TREC Rule1260-2-.09:

1. Disburse the funds pursuant to a reasonable interpretation of the contract.

A broker can simply read the contract, and if the language is clear, disburse the funds to the correct party.

2. Negotiate the disposition of the money.

If the broker is not comfortable disbursing the funds under an interpretation of the contract, then it is acceptable to negotiate the disposition of the money through written releases signed by the parties. It is important to note however that a broker cannot force any party to sign a release in order to receive the earnest money. The agreement to sign a release is the decision of the buyer or seller and can not be an absolute condition of releasing earnest money that rightfully belongs to one of the parties.

3. File an Interpleader Action.

If the contract or the facts surrounding the contract are not clear, and if the parties can not agree on the disposition of the funds, then the obvious alternative is to file an Interpleader Action to ask a court of competent jurisdiction to determine the correct owner of the funds. In this instance the broker pays the funds into

Court and waives any claim to the funds. The court will then decide the proper party to receive the earnest money. ( Instructions and forms are on the KAAR Website)

4. DO NOT WAIT.

Most importantly do not wait until you receive a complaint to resolve an earnest money dispute. You are expected to know what action to take to resolve earnest money disputes and an unreasonable delay in resolving a dispute could result in disciplinary action against your license.

Remember, funds in escrow or trustee accounts must be disbursed or interpled in a proper manner without unreasonable delay within thirty (30) days of a written demand from any party to the transaction.

The most important duty you hold as a licensee is the duty to properly handle the funds of others.

If you have questions regarding how to resolve a dispute there check with one of the following resources: your private attorney, the Tennessee Real Estate Commission or the Knoxville Area Association of REALTORS®.

Prompt action in resolving earnest money disputes can save all parties a lot of paperwork and many headaches later.

INTERPLEADER DEFINITION: A legal proceeding whereby an innocent third party (stakeholder), such as an escrow agent or broker, can deposit with the court property or money that he or she holds and that is subject to adverse claims so that the court can distribute it to the rightful claimant. The distribution of deposit or earnest money held in escrow is often a problem when the buyer and seller are in dispute over the purchase contract. If the escrow agent cannot get the parties to agree an the disposition of the deposit money, the recourse is to file an interpleader action asking the court to accept the money and distribute it to the rightful claimant. When the broker is holding the earnest money, the broker may originate the interpleader.