In Re: Six Star Realty, Inc.

In Re: Six Star Realty, Inc.

Civil Action-Business Law-Dissolution-Domestic Corporation-Real Estate Brokerage Firm-Receipt of Escrow Funds-Disposition-Efforts to Locate Parties-Good Faith

Six Star Realty, Inc. (“Six Star”), which is a Pennsylvania domestic business corporation operated as a real estate brokerage firm, filed a Petition for Court Intervention Regarding Outstanding Escrow Funds.  The Petition was filed on the basis that it ceased operations and sought to dissolve with inability to finalize the dissolution due to escrow funds from five (5) transactions remaining in its account for which the parties to the transactions were unable to be located, agree on distribution of the funds or deceased. 

1.  Title 63 P.S. § 455.608e(a)(4) provides that a broker is required to retain all escrow funds until an order of court specifying disposition becomes final. 

2.  Title 63 P.S. § 455.606a provides that a real estate broker has a duty to exercise reasonable professional skill and care and to account in a timely manner for all money received from a consumer to a transaction. 

3.  Where the escrow funds were retained between fifteen (15) and twenty-three (23) years, Six Star expended little effort in attempts to locate parties to the transactions at issue.

4.  Examples of good faith efforts to locate a party include inquiries of postal authorities pursuant to the Freedom of Information Act, inquiries of relatives, neighbors, friends and employers, examinations of local telephone directories, courthouse records, voter registration record, local tax records and motor vehicle records and reasonable Internet search. 

5.  Where Six Star essentially made no effort to locate the party who deposited escrow funds, requested notice via publication is denied with Six Star being directed to make a good faith effort to locate the party who deposited funds in escrow. 

6.  In light of the fact that an updated address was located for parties to another transaction and the within Petition was not mailed to that address, the Petition must be mailed to the updated address in order to locate the parties and to notify them of the proceedings. 

7.  For other transactions in which it is not clear why sales were not consummated and based upon the relatively small amount of the escrow, division of the escrow between the parties making the deposit will be directed without further investigation.

L.C.C.C.P. No. 2025-CV-0257, Opinion by Donna Long Brightbill, Judge, July 1, 2025.

IN THE COURT OF COMMON PLEAS

OF LEBANON COUNTY, PENNSYLVANIA

CIVIL ACTION – LAW

             :         

IN RE: SIX STAR REALTY, INC.    :                      No. 2025-CV-0257

            Distribution of Escrow Funds :

             :         

APPEARANCES:

Megan Ryland Tanner, Esquire                                              For Petitioner

OPINION BY LONG BRIGHTBILL, J., JULY 1, 2025:

            Before this Court is Petitioner’s, Six Star Realty, Inc., Petition for Court Intervention Regarding Outstanding Escrow Funds.

FACTUAL AND PROCEDURAL HISTORY

Six Star Realty, Inc. (hereafter “Petitioner”) is a Pennsylvania domestic business corporation that was incorporated in 1993 and operated as a real estate brokerage. The current shareholders and officers for Petitioner are Maxine Louise Brandt and Wanda L. Bechtold.

On February 25, 2025, Petitioner, through  counsel, filed the instant Petition for Court Intervention Regarding Outstanding Escrow Funds. The Petition alleges that Petitioner has ceased its business operations and seeks to dissolve.^[1] However, Petitioner has been unable to finalize the dissolution of the corporation due to escrow funds remaining in its account. Specifically, Petitioner has retained funds in its escrow account from five transactions for which Petitioner acted as the broker. The Petition alleges that the parties to each of the five transactions are either unable to be located, deceased, or unable to agree on a distribution of the escrow funds. Petitioner now seeks a court order specifying the disposition of the escrow funds in each of the five transactions.

A hearing was held before this Court on May 6, 2025. Petitioner appeared with counsel, Megan Ryland Tanner. Various parties from some of the five transactions were also present and testified. At the conclusion of the hearing, this Court ordered that Ms. Brandt and Ms. Bechtold jointly submit an Affidavit (hereafter “Brandt/Bechtold Affidavit”) detailing their efforts in investigating or locating the parties who did not appear. Attorney Ryland Tanner was also ordered to submit an Affidavit (hereafter “Ryland Tanner Affidavit”) detailing her efforts to locate these parties. Both Affidavits were filed on May 20, 2025, and have been carefully reviewed by this Court. This matter is now ripe for disposition.

DISCUSSION

Pursuant to the Real Estate Licensing and Registration Act, a broker is required to retain all escrow funds until:

(1) consummation of the transaction involved;

(2) termination prior to consummation of the transaction involved where there is either:

(i) no dispute as to entitlement to the deposit or other escrows; or

(ii) a prior agreement in writing or electronic form as to disposition of the deposit or other escrows in the event of a dispute regarding entitlement to the deposit or other escrows;

(3) receipt by the broker of instructions in writing or electronic form, signed by all of the parties to the transaction at any time after the broker’s receipt of the deposit or other escrows, directing the broker to release some or all of the deposit or other escrows; or

(4) an order of a court of competent jurisdiction specifying disposition of the deposit or other escrows becoming final and not subject to appeal.

63 P.S. § 455.608e(a).

            As subsections (1)-(3) do not apply to the escrow funds held in any of the five transactions at issue, Petitioner is seeking a court order directing the disposition of the escrow funds pursuant to subsection (4). 

            Preliminarily, the Court notes with displeasure the significant length of time that Petitioner has retained the escrow funds at issue. As a real estate broker, Petitioner had a duty to exercise reasonable professional skill and care and to account in a timely manner for all money received from any consumer to a transaction. See 63 P.S. § 455.606a. The earliest transaction at issue here was entered into on April 8, 2002, while the latest was entered into on January 17, 2008. Regardless of when Petitioner ceased business operations, Petitioner retained these funds between fifteen and twenty-three years, depending on the transaction, before attempting to resolve the outstanding escrows. In addition, after review of the Brandt/Bechtold Affidavit, it appears that Petitioner expended little effort in the attempts to locate the parties to the five transactions at issue. Petitioner’s apparent lack of concern in a timely resolution of  the outstanding escrow funds will not be overlooked by this Court when we craft an appropriate order. As set forth more fully below, in three out of the five transactions at issue, the Court believes Petitioner must do more to fulfill its duty of exercising reasonable professional skill and care. The five transactions are considered in turn below.

COUNT 1

            The first transaction concerns a contract for the sale of property located at 1233 Willow Street, Lebanon, Pennsylvania. The contract was executed on April 8, 2002, and lists Home Comings Financial Network as Sellers, and Auria Del Valle and Francisco Gonzalez as Buyers. Auria Del Valle and Francisco Gonzalez placed Three Hundred Dollars ($300.00) into escrow upon the execution of the contract, the escrow amount which is still being held by Petitioner. The Petition alleges that the address of Auria Del Valle and/or Francisco Gonalez is unknown, and seeks permission to provide notice via publication.

According to the Brandt/Bechtold Affidavit, the efforts made by Petitioner to locate Auria Del Valle and Francisco Gonzalez consisted solely of looking in their file and ascertaining that the file did not contain an address for Auria Del Valle or Francisco Gonzalez. The Brandt/Bechtold Affidavit does not describe any further efforts; it merely states that “[w]e have not had any recent contact with Auria Del Valle, Francisco Gonzalez or Home Comings Financial Network.”

The Ryland Tanner Affidavit details the efforts made by Attorney Ryland Tanner to locate the parties to this transaction. Attorney Ryland Tanner attempted to mail a copy of the Petition to a business address listed on a 2002 memo from Home Comings Financial Network. When the mail was returned as undeliverable, Attorney Ryland Tanner conducted an internet search, which yielded results suggesting that Home Comings Financial Network had filed for bankruptcy and was no longer in business. Attorney Ryland Tanner also conducted an internet search for Auria Del Valle and Francisco Gonzalez, but was unable to locate an address for either party.

After reviewing the Petition and Affidavits, the Court respectfully denies Petitioner’s request to provide notice via publication. The Pennsylvania Rules of Civil Procedure provide that a plaintiff may move the court for a special order for service of process by publication. Pa.R.Civ.P. 430. Such a motion must be accompanied by an affidavit stating the nature and extent of the investigation which has been made to determine the whereabouts of the defendant and the reasons why service cannot be made. Id. Examples of a good faith effort to locate a defendant include (1) inquiries of postal authorities including inquiries pursuant to the Freedom of Information Act, 39 C.F.R. Part 265, (2) inquiries of relatives, neighbors, friends, and employers of the defendant, (3) examinations of local telephone directories, courthouse records, voter registration records, local tax records, and motor vehicle records, and (4) a reasonable internet search. See Note to Pa.R.Civ.P. 430(a).

Here, Petitioner made essentially no effort to locate the parties. The Court will not order a disposition of the escrow funds in this transaction until Petitioner makes a good faith effort to locate Auria Del Valle and Francisco Gonzalez. This should include, but is not limited to, conducting a search of court records, including divorce, probate, and criminal records. Petitioner shall submit a supplemental Affidavit within thirty (30) days of the accompanying Order of Court detailing the additional efforts made to locate and notify Auria Del Valle and Francisco Gonzalez.

COUNT 2

The second transaction concerns a contract for the sale of property located at 261 Mountain Drive, Fredericksburg, Pennsylvania. The contract was executed on October 8, 2007, and lists Allen Sauder and Kathleen Sauder as Sellers, and Vernon Ewalt and Thelma Ewalt as Buyers. Vernon Ewalt and Thelma Ewalt placed One Thousand Dollars ($1,000.00) into escrow upon the execution of the contract, the escrow amount which is still being held by Petitioner. The Petition alleges that Petitioner has made attempts to resolve this matter, but that Vernon Ewalt and Thelma Ewalt are “unwilling to split the distribution of the funds held in escrow.” Petitioner seeks a final order regarding the distribution of the One Thousand Dollars ($1,000.00) held in escrow.

According to the Brandt/Bechtold Affidavit, the efforts made by Petitioner to resolve this matter consisted of sending a letter to Mr. and Mrs. Ewalt “notifying them of the need to resolve the escrow account.” No further detail is provided.

The Ryland Tanner Affidavit states that Attorney Ryland Tanner identified the last known address for Allen Sauder and Kathleen Sauder and mailed a copy of the Petition to that address. That mail has not been returned, and Kathleen Sauder appeared in person at the hearing on May 6, 2025. The Ryland Tanner Affidavit also states that a copy of the Petition was initially mailed to Vernon Ewalt and Thelma Ewalt at an address of 261 Mountain Drive, Fredericksburg, Pennsylvania. Subsequent to the hearing held on May 6, 2025, Attorney Ryland Tanner obtained the original real estate file for this transaction, and discovered an updated address of 200 Colt Drive, Palmyra, Pennsylvania. The Ryland Tanner Affidavit states that “[b]ased on this information, Mr. and Mrs. Ewalt did not receive a copy of the [P]etition.”

After reviewing the Petition and Affidavits, the Court respectfully denies Petitioner’s request for a final order regarding distribution of the One Thousand Dollars ($1,000.00) held in escrow. It appears that although an updated address was located for Vernon Ewalt and Thelma Ewalt, the Petition was never mailed to that updated address. Petitioner must mail the Petition to Vernon Ewalt and Thelma Ewalt at the updated address of 200 Colt Drive, Palmyra, Pennsylvania. Petitioner shall submit a supplemental Affidavit within thirty (30) days of the accompanying Order of Court setting forth when the Petition was mailed and whether it was returned. If the Petition is returned from 200 Colt Drive as undeliverable, the supplemental Affidavit should also set forth any additional efforts made to locate and notify Vernon Ewalt and Thelma Ewalt.

COUNT 3

The third transaction concerns a contract for the sale of property located at 600-604 North 10^th Street, Lebanon, Pennsylvania. The contract was executed on January 17, 2008, and lists Tom Morrissey Jr. as Seller, and Sean J. Myers as Buyer. Sean J. Myers placed One Thousand Dollars ($1,000.00) into escrow upon the execution of the contract, the escrow amount which is still being held by Petitioner. The Petition alleges that Petitioner has made attempts to resolve this matter but has been unsuccessful because Mr. Myers has not responded. Petitioner seeks a final order regarding the distribution of the One Thousand Dollars ($1,000.00) held in escrow.

According to the Brandt/Bechtold Affidavit, the efforts made by Petitioner to resolve this matter consisted of mailing correspondence to Tom Morrisey Jr. regarding the need to resolve the escrow account. Tom Morrisey Jr. returned an executed Agreement of Sale Release and Distribution of Deposit Money to Petitioner.

The Ryland Tanner Affidavit states that a copy of the Petition was mailed to the last known address for Tom Morrissey Jr. and for Sean J. Myers. Neither Petition was returned as undeliverable. The Court notes that Sean J. Myers appeared for the hearing on May 6, 2025.

After reviewing the Petition and Affidavits, the Court will grant Petitioner’s request for a final order regarding distribution of the One Thousand Dollars ($1,000.00) held in escrow. Because the Court is unsure as to why the sale was not consummated and considering the relatively small amount of escrow, the Court will order a division without further investigation. The One Thousand Dollars ($1,000.00) held in escrow shall be divided equally between Tom Morrissey Jr. and Sean J. Myers. Any accrued interest on the One Thousand Dollars ($1,000.00) shall also be divided equally between Tom Morrissey Jr. and Sean J. Myers.

COUNT 4

The fourth transaction concerns a contract for the sale of property located at 401 Canal Street, Lebanon, Pennsylvania. The contract was executed on May 2, 2006, and lists Kyriaki Kolovani as Seller, and Julio Diaz as Buyer. Julio Diaz placed Two Thousand Dollars ($2,000.00) into escrow upon the execution of the contract, the escrow amount which is still being held by Petitioner. The Petition alleges that Kyriaki Kolovani is deceased, that Julio Diaz has a last known address of 1420 Saint Louis Avenue, Bay Shore, New York, and that “[Petitioner] has been unable to resolve this matter.” Petitioner seeks a final order regarding the distribution of the Two Thousand Dollars ($2,000.00) held in escrow.

Based on the Brandt/Bechtold Affidavit, Petitioner appears to have made no efforts to locate Julio Diaz. The Affidavit states simply that “[t]here is no information contained within the file to indicate what steps were taken to notify the parties of the need to resolve the escrow being held.”

The Ryland Tanner Affidavit states that Kyriaki Kolovani passed away on March 23, 2015. A copy of the Petition was mailed to Kyriaki Kolovani’s daughter, Anthi Frangadia. A copy of the Petition was also mailed to the last known address for Julio Diaz. Both parties appeared at the hearing on May 26, 2025.

After reviewing the Petition and Affidavits, the Court will grant Petitioner’s request for a final order regarding distribution of the Two Thousand Dollars ($2,000.00) held in escrow. Because the Court is unsure as to why the sale was not consummated and considering the relatively small amount of escrow, the Court will order a division without further investigation. The Two Thousand Dollars ($2,000.00) held in escrow shall be divided equally between the estate of Kyriaki Kolovani and Julio Diaz. Any accrued interest on the Two Thousand Dollars ($2,000.00) shall also be divided equally between the estate of Kyriaki Kolovani and Julio Diaz.

COUNT 5

The fifth transaction concerns a contract for the sale of property located at 321 Canal Street, Lebanon, Pennsylvania. The contract was executed on August 24, 2002, and lists Melvin Morales and Maria Morales as Sellers, and James Horst, Jr. as Buyer. James Horst, Jr. placed Two Hundred Dollars ($200.00) into escrow upon the execution of the contract, the escrow amount which is still being held by Petitioner. The Petition alleges that Petitioner has made attempts to resolve this matter but has been unsuccessful. Petitioner seeks a final order regarding the distribution of the Two Hundred Dollars ($200.00) held in escrow.

Based on the Brandt/Bechtold Affidavit, Petitioner appears to have made no efforts to locate either party to this transaction. Again, the Affidavit states simply that “[t]here is no information contained within the file to indicate what steps were taken to notify the parties of the need to resolve the escrow being held.”

The Ryland Tanner Affidavit sets forth the efforts made by Attorney Ryland Tanner to locate the parties to this transaction. Attorney Ryland Tanner mailed a copy of the Petition to the last known address for James Horst, Jr. and attempted to mail a copy to Melvin Morales and Maria Morales. Both items were returned as undeliverable.

After reviewing the Petition and Affidavits, the Court respectfully denies Petitioner’s request for a final order regarding distribution of the Two Hundred Dollars ($200.00) held in escrow. It appears that the Petition that was mailed to Melvin Morales and Maria Morales was mistakenly sent to 1215 Colebrook Road, rather than 1216 Colebrook Road, which was the Morales’ correct address. Petitioner must make a good faith effort to locate Melvin Morales and Maria Morales. This should include, but is not limited to, conducting a search of court records, including divorce, probate, and criminal records, as well as any publicly available property records. Petitioner shall submit a supplemental Affidavit within thirty (30) days of the accompanying Order of Court setting forth the additional efforts made to locate and notify Melvin Morales and Maria Morales.

CONCLUSION

For the foregoing reasons, the Petition for Court Intervention Regarding Distribution of Outstanding Escrow Funds is GRANTED in part and DENIED in part. With regard to Counts 3 and 4, Petitioner may immediately distribute the escrow funds as set forth above and in the accompanying Order of Court. With regard to Counts 1, 2, and 5, Petitioner must submit a supplemental Affidavit within thirty (30) days of the accompanying Order of Court setting forth the additional efforts made to locate and notify the parties, as set forth in more detail above and in the accompanying Order of Court.  

A concomitant Order will be entered consistent with the foregoing.     

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[1] It is not clear when exactly Petitioner ceased its business operations.