If a Broker Embezzles, Are Clients’ Boat Sales Still Legal?
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By: David Weil, Esq.
August, 2009
Q:
I have been reading news reports recently about two different yacht brokers who are accused of embezzling client funds from their brokerage trust accounts. Thank-fully, I was not personally harmed by either of these transgressions, but it did raise a few questions that could affect me as a person who is trying to sell a boat. First, if a broker absconds with the buyer’s purchase money before the funds are disbursed to the seller, who owns the boat? Does the deal close when the broker receives the money, or when the seller receives the money? Second, how does this sort of thing affect the active listings of the broker? Are those boat owners free to list their boat with another broker?
A:
These issues are indeed in the news right now. California brokers have a long history as honest, hard-working professionals, but coincidentally two different brokers — one in Northern California and one in Southern California — now stand accused of stealing client funds. Perhaps it’s a sign of the times.
We have received quite a few inquiries in connection with these two embezzlement cases, and it would be impossible to discuss, in this column, all of the concerns raised by the individual buyers, sellers, brokers and salespeople who may be affected. When a broker or other trusted intermediary in a transaction steals client funds, it invariably leads to a painful and expensive battle between a wide range of innocent parties who were damaged by the crime. In the question presented above, our reader has asked about two of the more common issues that will arise in these cases.
The most significant legal concern among the innocent victims in a yacht sale transaction is the question of whether the sale was completed. If legal title passed to the buyer without a transfer of the purchase money to the seller, the seller will have lost the vessel without being paid. If title did not change hands, the buyer will have lost his or her purchase money without receiving title to the boat.
The transfer of legal title and ownership of any property is generally controlled by the
David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state
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