[*1]

With a Contract of Sale dated "October 2003," plaintiff Spiro Geroulanos agreed to purchase, and defendants Ricardo Maynard and Renaldo Maynard agreed to sell, several parcels of real property on Sixth Avenue, Brooklyn. A downpayment of $150,000 was deposited with the Maynard Defendants' attorney, defendant Scott Gale, as escrow agent. The Maynard Defendants did not transfer the property to Plaintiff; rather, they sold it to defendant Park Slope Plaza LLC for a substantially higher purchase price. Defendant Gale, however, distributed Plaintiff's $150,000 downpayment $50,000 to each of the Maynard Defendants, and retained or received $50,000 for legal expenses likely to arise from the correctly anticipated lawsuit by Plaintiff.

Plaintiff's Verified Complaint sought a judgment voiding the conveyance to Park Slope Plaza and ordering specific performance of the Contract of Sale between Plaintiff and the Maynard Defendants. In March 2008, however, Plaintiff acquired the property from Park Slope Plaza for a purchase price still higher than the price Park Slope Plaza paid to the Maynard Defendants, and the action was discontinued as against Park Slope.

Remaining were Plaintiff's claims for monetary damages against the Maynard Defendants and defendant Gale. As to the Maynard Defendants, Plaintiff alleges "monetary damages consisting, inter alia, of the Deposit, the costs that he incurred in consideration of the Contract and prepatory to taking title, and the difference between the Purchase Price [specified in the [*2]Geroulanos/Maynard Contract of Sale] and the fair market value of the Land along with Mr. Geroulanos's lost profits" (Verified Complaint, ¶ 45.) As to defendant Gale, Plaintiff alleges that "Mr. Geroulanos is entitled to monetary damages against defendant Scott Gale in the amount of the Deposit together with accrued interest and an order and judgment compelling [Defendant] to pay to and turn over to Mr. Geroulanos the amount of the Deposit together with accrued interest, costs and disbursements." (Id., ¶ 47.)

On February 17, 2006, the Hon. Joseph Silverman granted Plaintiff's motion to strike the answer of the Maynard Defendants and defendant Gale because of their failure to comply with a previous disclosure order. Justice Silverman ordered that "inquest be held at time of trial" against the other named defendant, Park Slope Plaza. With the discontinuance of the action against Park Slope Plaza, there was no trial, and the matter proceeded to inquest before this Court.

Inquest was held from December 16, 2008 through January 8, 2009. The Maynard Defendants appeared by counsel; defendant Gale also appeared. (Effective December 20, 2008, Mr. Gale resigned as a member of the New York bar.) A schedule was established for post-inquest briefing, which was extended because of delay in obtaining the transcript. Just before the final due date, the Court was advised that Plaintiff and the Maynard Defendants had settled, but to date the Court has not been presented with any stipulated order or judgment reflecting the settlement.

As to Mr. Gale, the question becomes whether judgment shall be entered against him for the relief prayed for in the Verified Complaint, which in turn requires a determination as to the nature of the proof, if any, that Plaintiff was required to present at the inquest to sustain his claim against Mr. Gale, and, if necessary, a weighing of that proof. Despite the ubiquity of default generally and opinions addressing it, direction is not entirely clear.

"[A] defendant whose answer is striken as a result of a default admits all traversable allegations in the complaint, including the basic allegation of liability, but does not admit the plaintiff's conclusion as to damages." (Rokina Opt. Co. v Camera King, 63 NY2d 728, 730 [1984] [emphasis added].) Some opinions suggest that, once a defendant's answer has been stricken as a penalty for failing to comply with a disclosure order, a finding of liability follows, and any inquest is directed to damages only. (See Pisciotta v Lifestyles Designs, Inc., 62 AD3d 850, 852 [2d Dept 2009]; Abbas v Cole, 44 AD3d 31, 33-34 [2d Dept 2007]; Ben. Mortg. Corp. v Lawrence, 5 AD3d 339, 340 [2d Dept 2004]; Lavi v Lavi, 256 AD2d 602, 603 [2d Dept 1998].)

Other opinions state or suggest that "[a]n order pursuant to striking a defendant's answer is the equivalent of a default in answering," and that "[a] plaintiff's right to recover upon a defendant's default in answering is governed by CPLR 3215 . . . , which requires that the plaintiff have a viable cause of action." (See Litvinskiy v May Entm't Group, 44 AD2d 627, 627 [2d Dept 2007]; see also Carabello v Luna, 49 AD3d 679, 680 [2d Dept 2008]; Suburban Graphics Supply Corp. v Nagle, 5 AD3d 663, 665 [2d Dept 2004].) [*3]

CPLR 3215 (f) provides that, on a application for judgment by default, the applicant make "proof of the facts constituting the claim, the default and the amount due." The proof as to the facts constituting the claim and the amount due must be made "by affidavit made by the party" (except where the state of New York is the plaintiff), but a verified complaint that has been served may be used for those purposes. (See CPLR 3215 [f]; see also CPLR 105 [u].) "Given that in default proceedings the defendant has failed to appear and the plaintiff does not have the benefit of discovery, the affidavit or verified complaint need only allege enough facts to enable a court to determine that a viable cause of action exists." (Woodson v Mendon Leasing Corp., 100 NY2d 62, 70-71 [2003]; see also Wilson v Galicia Contr. & Restoration Corp., 10 NY3d 827, 829-30 [2008].) "Indeed, defaulters are deemed to have admitted all factual allegations contained in the complaint and all reasonable inferences that flow from them." (Woodson v Mendon Leasing Corp., 100 NY2d at 71.)

Although the Second Department earlier characterized the plaintiff's burden as "prima facie proof of a cause of action" (see Silberstein v Presbyterian Hosp., 96 AD2d 1096, 1096 [2d Dept 1983]), more recent Second Department opinions adopt the "viable cause of action" formulation (see CPS Group, Inc. v Gastro Enters., Corp., 54 AD3d 800, 801 [2d Dept 2008]; Litvinskiy v May Entm't Group, Inc., 44 AD3d at 627; Resnick v Lebovitz, 28 AD3d 533, 534 [2d Dept 2006]; compare Martocci v Bowaski Ice House, LLC, 31 AD3d 1021, 1022 [3d Dept 2006] ["prima facie right to judgment"]; Matter of Dyno v Rose, 260 AD2d 694, 698 [3d Dept 1999] ["prima facie cause of action"]; Joosten v Gale, 129 AD2d 531, 535 [1st Dept 1987] ["prima facie validity"].) It does not appear that there is an appreciable difference in meaning between the two formulations for this purpose.

The phrase "viable cause of action" speaks to both the law and the facts. Whether by verified complaint, affidavit, or other proof (see Carabello v Luna, 49 AD3d at 680 [depositions]), the plaintiff's allegations must be more than conclusory (see Luna v Luna, 263 AD2d 470, 470 [2d Dept 1999]; St. Paul Fire & Marine Ins. Co. v A.L. Eastmond & Sons, 244 AD2d 294, 294 [1st Dept 1997].) "The standard of proof is not stringent, amounting only to some firsthand confirmation of the facts." (Joosten v Gale, 129 AD2d at 535.) "[T]he legal conclusions to be drawn from such proof are reserved for the court's determination," and "[w]here a valid cause of action is not stated, the party moving for judgment is not entitled to the requested relief, even on default." (Green v Dolphy Contr. Co., 187 AD2d 635, 636 [2d Dept 1992].)

Looking first, then, at the allegations of Plaintiff's Verified Complaint, there are relatively few specifically addressed to defendant Gale. It is alleged that Mr. Gale is "the escrowee concerning a certain deposit given by Mr. Geroulanos as contract vendee," specified as $150,000 (Verified Complaint, ¶ ¶ 4, 10); that defendant Gale "has not returned the Deposit to Mr. Geroulanos despite the Sellers' dishonor of their Contract obligations" (id., ¶ 34); and that defendant Gale "has either paid the Deposit to the Sellers or has improperly retained it and failed to pay it to Mr. Geroulanos" (id., ¶ 35.) A copy of the Contract of Sale between Plaintiff and the Maynard Defendants is attached to the Verified Complaint, and is authenticated as such (id., ¶ 7.) [*4]The Contract of Sale contains the following provisions concerning the escrow:

"§2.05. (a) If the sum paid under paragraph (a) of Schedule C or any other sums paid on account of the Purchase Price prior to the Closing (collectively, Downpayment') are paid by check or checks drawn to the order of and delivered to Seller's attorney or another escrow agent ( Escrowee'), the Escrowee shall hold the proceeds thereof in escrow in a special bank account . . . until the Closing or sooner termination of this contract and shall pay over or apply such proceeds in accordance with the terms of this section . . . At the Closing, such proceeds . . . shall be paid by Escrowee to Seller. If for any reason the closing does not occur and either party makes written demand upon Escrowee for payment of such amount, Escrowee shall give written notice to the other party of such demand. If Escrowee does not receive a written objection from the other party to the proposed payment within 10 business days after the giving of such notice, Escrowee is hereby authorized to make such payment. If Escrowee does receive such written objection within such 10 day period or if for any other reason Escrowee shall in good faith elect not to make such payment, Escrowee shall continue to hold such amount until otherwise directed by written instructions from the parties to this contract or a final judgment of a court . . .

(b) The parties acknowledge that Escrowee is acting solely as a stakeholder at their request and for their convenience, that Escrowee shall not be deemed to be the agent of either of the parties, and that Escrowee shall not be liable to either of the parties for any act or omission on its part unless taken or suffered in bad faith, in wilful disregard of this contract, or involving gross negligence . . .

( c) Escrowee has acknowledged agreement to these provisions by signing in the place indicated on the signature page of this contract." (Contract of Sale, § 2.05 [emphasis added].)

The signature page of the Contract of Sale contains the signature of defendant Gale under the legend, "The undersigned Escrowee hereby acknowledges receipt of $150,000, by check subject to collection, to be held in escrow pursuant to § 2.05."

Plaintiff's Verified Complaint makes no reference to the escrow provisions of the Contract of Sale, and contains no allegations addressed to its terms. Specifically, the Verified Complaint does not allege that written demand was made upon Mr. Gale for return of the Deposit/Downpayment, or that Mr. Gale acted "in bad faith, in wilful disregard of [the] contract, or [with] gross negligence" in failing to return it or paying it instead to the Maynard Defendants and himself.

"[A]n escrow agreement [is] an agreement pursuant to which funds are delivered to a third-party depositary, the grantor relinquishes control over the funds, and the funds are to be delivered to a third party conditioned upon the performance of some act or the occurrence of some event." (Great Am. Ins. Co. v Canandaigua Nat'l Bank & Trust Co., 23 AD3d 1025, 1027 [4th Dept 2005].) An escrowee "owe[s] the other parties to the agreement the fiduciary duty of a trustee and [is] under a duty not to deliver the escrow to [anyone] except upon strict compliance [*5]with the conditions imposed' by the escrow agreement." (See id. at 1027-28 [quoting Farago v Burke, 262 NY 229, 233 (1933)]; see also Iannizzi v Seckin, 5 AD3d 555, 556 [2d Dept 2004].) An escrow agent is "obligated to secure the funds and . . . [is] absolutely prohibited from disposing of them unilaterally." (Id. [quoting Takayama v Schaefer, 214 AD2d 21, 25 (2d Dept 1998)].)

"[A]n escrow agent can be held liable for breach of the escrow agreement and breach of fiduciary duty as escrowee." (Takayama v Schaefer, 214 AD2d at 25.) "The plaintiff must show the escrow agent breached its duty under the escrow agreement, or breached its fiduciary duties to either the seller or the buyer." (Id. at 26.) Under some circumstances, "a delivery of the property that is inconsistent with the terms of the [escrow] agreement may constitute conversion." (Miller v J.A. Keefe, 276 AD2d 757, 757 [2d Dept 2000] [payment of an attorney's fee from the escrow fund].)

"The law makes the depositary a trustee for both parties . . . , and even subjects him to damages for his failure" to comply with the conditions of the escrow agreement. (See Farago v Burke, 262 NY at 233.) "As a fiduciary, defendant had a strict obligation to protect the rights of both parties." (Grinblat v Taubenblat, 107 AD2d 735, 736 [2d Dept 1985].) "[I]n the event of a dispute, the escrow funds may not be released until the conditions of the escrow agreement are fully performed and it is clear that no factual issues of viable claims exist under the closely scrutinized terms of the escrow agreement'." (Takayama v Schaefer, 240 AD2d at 25 [quoting E.S.P. Adj. Servs. v Asta Group, 125 AD2d 849, 850 (3d Dept 1986)].)

In Fitzgerald v Eaton (265 AD2d 374 [2d Dept 1999]), which also involved a contract for the purchase and sale of real property, the Second Department held that a complaint should have been dismissed insofar as asserted against the seller's attorney as escrowee "as it lacks any specific factual allegations of bad faith and wilful disregard of any provision of the contract of sale" (see id. at 376.) The opinion does not indicate the source of the limitation on the escrowee's liability to "bad faith and wilful disregard of [a] provision of the contract of sale," but it does not seem unreasonable to suspect that the limitation was found in the contract of sale or escrow agreement itself. (See Ansonia Realty Co. v Ansonia Assocs., 142 AD2d at 518 ["Under the terms of the contract, the escrow agent is only liable for acts or omissions taken in bad faith or in wilful disregard of the contract."].) In support of its holding, the Second Department cites only its prior decision in Takayama v Schaefer (240 AD2d at 21), which does not contain a limitation of either "bad faith" or "wilful disregard.," and CPLR 3016 (b), which requires that "[w]here a cause of action . . . is based upon . . . wilful default, [or] breach of trust . . . , the circumstances constituting the wrong shall be stated in detail."

The significance generally of Fitzgerald v Eaton (265 AD2d 374) is at least two-fold. First, together with Ansonia Realty v Ansonia Assocs. (142 AD2d 514), the decision establishes that an escrow agent in connection with the purchase and sale of real property may limit its liability to circumstances in which it acts in bad faith or wilful disregard of the contract. Second, the decision establishes that an action against an escrow agent must comply with the particularity [*6]requirement of CPLR 3016 (b), although it is not entirely clear whether the requirement applies in the absence of a limit on liability.

And where, as here, a plaintiff seeks judgment on default against an escrowee for breach of duty, a verified complaint or affidavit that does not satisfy CPLR 3016 (b) does not state a "viable" claim or cause of action. There is a serious question whether Plaintiff's Verified Complaint would have been sufficient in itself to meet the standard. Because, however, the Court finds that the evidence at the inquest was sufficient to establish the "viability" of Plaintiff's claim against defendant Gale, the Court need not resolve the question.

It may be that "a neutral escrow agent should have either sought the purchaser's consent to release the escrow funds or failing to obtain such consent, should have retained the funds pending a declaration by a court." (See Ansonia Realty Co. v Ansonia Assocs., 142 AD2d at 518.) But the only authority of which this Court is aware that addresses an escrow agent's conduct where liability is limited to bad faith or wilful disregard, again Ansonia Realty, suggests that it may not be enough in itself. There, the court held that "the escrow agent's delivery of the escrow funds to the [seller], in disregard of the express contractual provisions, renders him liable" to the purchaser. (See id. at 518.) The court does not articulate any general meaning to "bad faith" or "wilful disregard" in this context.

"In New York, as elsewhere, good faith' connotes an actual state of mind - - a state of mind motivated by proper motive." (Polotti v Flemming, 277 F2d 864, 868 [2d Cir 1960]; see also Tracteble Energy Mktg. v AEP Power Mktg., 487 F3d 89, 100 n8 [2d Cir 2007].) "It encompasses, among other things, an honest belief, the absence of malice and the absence of a design to defraud or to seek an unconscionable advantage." (Doyle v Gordon, 158 NYS2d 248, 259-60 [Sup Ct, NY County 1954]; see also Adler v 720 Park Ave. Corp., 87 AD2d 514, 515 [1st Dept 1982]; Muller Boat Works, Inc. v Unnamed 52' House Barge, 464 F Supp 2d 127, 141 [EDNY 2006].) "The fact that a person could have adopted a more prudent course than the course taken does not prevent him from establishing that the course taken was one taken in good faith." (Polotti v Flemming, 277 AD2d at 868.) Although fundamentally subjective, "[t]he existence of [a person's] good faith as a substantive fact . . . necessitates an examination and evaluation of external manifestations." (See Adler v 720 Park Ave. Corp., 87 AD2d at 515 [quoting Doyle v Gordon, 158 NYS2d at 259-60.)

The Contract of Sale states that closing of title "shall take place on the scheduled date and time of closing specified in schedule D" (Contract of Sale, § 3.01), but there is no "Schedule D." A Rider to Contract, however, provided:

"7. Closing date shall be the earlier of:

a. Thirty (30) days from the receipt of time of the essence from Purchaser's Attorney (sent by certified and regular mail) [*7]

b. 30 days from the receipt of time of the essence from Seller's Attorney (sent by certified and regular mail). In no event shall time of the essence from Seller's Attorney be sent prior to a reputable New York title insurance company in New York agreeing to insure parcel with the approximate dimensions of 108.8 feet by 98.11 feet and compliance with the provisions of paragraph 3a and 3b of this rider."

Paragraph 3a and 3b provided that, if Seller was not able to convey title to, or a reputable New York title insurer would not insure, a parcel with the stated dimensions, Purchaser could "purchase property as the seller is able to transfer," "renegotiate price with seller," or "cancel contract of sale."

These provisions are repeated in an Amended Rider to Contract dated November 14, 2004, except that the closing date would be 40 days "from the receipt of time of the essence from Seller's Attorney," rather than 30 days; and except that the "cancel contract of sale" alternative was deleted from paragraph 3.

A letter dated April 15, 2004 from defendant Gale to Georgia A. Tsismenakis, Esq., Plaintiff's attorney, designated "Time of the Essence - Maynard to Spiro," stated "your client must close on or before April 30, 2004, or the contract will be rescinded and your client's down payment will be forfeited." This communication was clearly ineffective, if for no other reason than that the Contract required 40 days.

Mr. Gale wrote to Ms. Tsismenakis again on April 26: "According to the terms of the contract, I now serve upon you time of the essence letter. Your failure to close on or before the timeframe proscribed [sic] in the Contract will result in a repudiation of the contract and loss of your client's down payment."

Ms. Tsismenakis responded on April 28, rejecting Seller's Attorney's "time of the essence," on the ground that the condition to establishing "time of the essence," i.e., the agreement of a reputable New York title insurer to insure title to the specified dimensions, had not been met.

On May 4, Ms. Tsismenakis received a telephone message from defendant Gale, advising that he had been instructed by his clients to return the Deposit/Downpayment, and to rescind the contract. Mr. Gale said that he would confirm in a fax, but he did not. Rather, on the next day, he mailed to Ms. Tsismenakis a signed tax form that was required for recording of a Memorandum of Contract that had been executed by the Maynard Defendants on April 22 and Mr. Geroulanos on April 29.

Ms. Tsismenakis continued her efforts on Plaintiff's behalf to resolve the title issues, and maintained telephone and written communication with defendant Gale's office, into August 2004. In the meanwhile, however, on June 21, Mr. Gale, as attorney for the Maynard Defendants, signed an Option to Purchase Property with Cross State Development Inc., which apparently [*8]assigned the agreement to Park Slope Plaza Realty LLC. On July 1, the Maynard Defendants sold the property to Park Slope Plaza.

At about the time that the property was sold to Park Slope Plaza, defendant Gale disposed of the $150,000 Deposit/Downpayment. Since "bad faith" and "wilful disregard" are subjective (although "gross negligence" is not), defendant Gale's own testimony is of particular importance.

"QWhat did you do with the $150,000?

AI gave it to the Maynards.

QWhen was that?

AI can't recall the exact date. It was on or before the time of the - - following the time of the essence letter. It was demanded by Renaldo Maynard. I hesitated, but I gave it to him. I felt he was right.

And thereafter he forwarded me a portion of it to defend him on an action from Mr. Geroulanos, the Plaintiff in the matter.

QDid you give them equal portions or give the portion to one person and not the other?

AI recall it was a check to issue.

QDid you give $50,000 to Richardo, and $50,000 to Renaldo?

AYes.

QAnd then you kept $50,000.00?

AThey said take this to defend.

QAnd you entered the checks to them because - -

THE COURT: Take this to defend - -

THE WITNESS: The lawsuit from Mr. Geroulanos.

THE COURT: But that wouldn't have happened until two months later.

THE WITNESS: It appears it was anticipated.

THE COURT: That's why I asked the question.

QAt any time did you notify [Ms. Tsismenakis] or Spiro Geroulanos or anybody on behalf of the Plaintiff before the payment of that money to the Maynards that you intended to make that payment?

AThat payment meaning the payment back to the Maynards of the down payment check?

QYes.

ANo. [*9]

QOkay. Did you make that payment based upon a decision that you made on your behalf - -

ANo.

QLet me finish. A decision that you made that Mr. Geroulanos had breached the contract?

ANo.

QThen what was the basis for paying that money to the Maynards?

AMaynards were very adamant, and think that we had given them far too much time to close. That I had already served with a time of the essence letter specifically to tell them the reasons why.

I served pursuant to the terms of the contract and all riders. And we gave - - we served them with the time of the essence, I believe, in April, and we were into July or August and we had heard nothing from [Ms. Tsismenakis] or Mr. Geroulanos, except their objection to the time of the essence. They just did nothing there, and my clients rightfully were upset with me that they had breached, and they wanted their down payment because I really gave them a hard time. Because I gave notice to give Mr. Geroulanos more time. They were upset with me.

There were a lot of problems. He said he found a glacier lake under the property. We gave him more time. My clients were upset. After giving them, I think, 80 days more than what is required with the time of the essence letter, he said nothing and did nothing.

...

QAfter the April 26, 2004 letter, did you ever inform [Ms. Tsismenakis] that you and your client or your client considered the contract with Mr. Geroulanos to be terminated.

AOh, yes.

QHow did you do that?

AYou asked me if I told her that it was terminated.

QDid you ever communicate it with her?

AAt the time of the essence letter, no. There was no communication regarding whether or not the contract was terminated. No, but it was assumed to be terminated.

QDid you ever inform [Ms. Tsismenakis] that you had paid the contract deposit to the Maynards?

ANo.

...

QWell did you ever tell [Ms. Tsismenakis]or anybody on behalf of the Plaintiff that you were in discussions with another party in connection with possibly selling the property to that other party? [*10]

...

ADid I tell [Ms. Tsismenakis] that I was entering negotiations with someone else?

QThat you were discussing selling the property to another party.

AI never said that to anyone. Nor were the discussions I was going to sell to anyone."

(Transcript at 714, 716-18, 723-24, 727-28, 756-57.)

Mr. Gale also testified that, at the time he delivered the Deposit/Downpayment to the Maynard Defendants, he believed that Plaintiff had "breached the contract" and "forfeited the . . . deposit." (Id. at 757.) The Court cannot consider that testimony, because at the inquest defaulting defendant Gale was "not permitted to introduce evidence to defeat the plaintiff's cause of action." (See Suburban Graphics Supply Corp. v Nagle, 5 AD3d at 665; see also Hussein v Ratcher, 272 AD2d 446, 447 [2d Dept 2000].) In any event, although an escrow agent's belief as to which party is entitled to the escrow is material to a determination as to the agent's "bad faith," "wilful disregard," and "gross negligence," it is not controlling, and, in this case, would not change the Court's determination.

Plaintiff did not learn that the property had been conveyed to Park Slope Plaza until the latter part of August 2004, when, in checking whether the Memorandum of Contract had been recorded, Ms. Tsismenakis discovered that the deed from the Maynards to Park Slope Plaza had been recorded. This action was commenced on September 4, 2004.

The Court will assume that, if the Maynard Defendants were entitled to the $150,000 Deposit/Downpayment, then defendant Gale would not be liable to Plaintiff for delivering it to him, even if Mr. Gale did not follow the procedure detailed in the Contract of Sale. The Court does not see evidence on this record that Plaintiff sustained any loss or damage by reason of the failure, in itself, to follow the contractual procedures; and Plaintiff makes no argument that defendant Gale is liable for damages in the amount of the Deposit/Downpayment even if Plaintiff was not entitled to its return.

A "vendee who defaults on a real estate contract without lawful excuse, cannot recover the down payment." (Cipriano v Glen Cove Lodge No. 1458, B.P.O.E., 1 NY3d 53, 62 [2003] [quoting Maxton Bldrs. v Lo Galho, 68 NY2d 373, 378 (1986)]; see also Verolla v Beechwood Carmen Bldg. Corp., 43 AD3d 913, 914 [2d Dept 2007]; Micciche v Homes by Timbers, Inc., 18 AD3d 833, 834 [2d Dept 2005].) Where the buyer fails to close on a "time of the essence" closing date, and the seller is ready, willing, and able to perform, the buyer has defaulted, and the seller may retain any funds deposited. (See No. 1 Funding Center, Inc. v H & G Operating Corp., 48 AD3d 908, 911 [3d Dept 2008]; Capece v Robbins, 46 AD3d 589, 590 [2d Dept 2007].) [*11]

On the other hand, if the seller fails to establish a "time of the essence" closing date, and cannot convey title in accordance with the contract, the buyer is, at the least, entitled to a return of the deposit. (See Waldman v LDK Realty, Inc., ___ AD3d ___, 2009 NY Slip Op 4894, * 2 [2d Dept June 9, 2009]; Arker Cos. v New York State Urban Dev. Corp., 47 AD3d 739, 740 [2d Dept, 2008]; Karl v Kessler, 47 AD3d 681, 682 [2d Dept 2008]; Singh v Gopaul, 43 AD3d 1145, 1146 [2d Dept 2007].)

The default of the Maynard Defendants, supported by the admitted allegations of the Verified Complaint, compel the conclusion that the Maynard Defendants breached the Contract of Sale and would be liable, at the least, for the $150,000 Deposit/Downpayment. The allegations of the Verified Complaint - - including those relating to "The Discrepancy Between the Contract Description and the Insurable Dimensions of the Land" (Verified Complaint, ¶ ¶ 18-23), "The Sellers' Improper Time of the Essence Demand and Its Rejection" (id., ¶ ¶ 24-28), and "Sellers' Subsequent Sale of the Land to Park Slope and Retention of the Deposit" (id., ¶ ¶ 29-35) - - are more than sufficient to state a "viable cause of action" against the Maynard Defendants. Although unnecessary, evidence at the inquest supported the allegations, and the Maynard Defendants were not permitted to dispute it.

Breach of the Contract of Sale by the Maynard Defendants does not, however, in itself, establish a "viable cause of action" against defendant Gale. The Court must yet conclude that the evidence at the inquest establishes a "viable" claim that his conduct with respect to the escrow constituted "bad faith," "wilful disregard of [the] contract," or "gross negligence." The Court concludes that it does.

Other than Ansonia Realty Co. v Ansonia Assocs. (142 AD2d 514) and Fitzgerald v Eaton (265 AD2d 374), both discussed above, the caselaw addressing such a limitation on an escrow agent's liability appears sparse. The only other decision of which the Court is aware is Tzanetatos v Scott (240 AD2d 320 [1st Dept 1997].) There, defendant was the attorney for the sellers in a real estate transaction, where there was an escrow agreement similar to that in this case. The First Department upheld denial of the attorney's motion to dismiss the purchaser's complaint where the attorney released the downpayment after receipt of the purchaser's notice of objection. (See id. at 320.)

Defendant Gale released the $150,000 Deposit/Downpayment to his clients in complete, and necessarily wilful, disregard of the clear procedure set forth in the escrow provisions of the Contract of Sale, and with actual awareness from Ms. Tsismenakis's April 28 letter that Plaintiff would object. Mr. Gale's stated confidence in his opinion that the Maynard Defendants were entitled to the payment is belied by his having taken $50,000 to cover legal expenses related to "anticipated" litigation by Plaintiff; and by his failure to ever advise Plaintiff that his clients considered the Contract of Sale a dead-letter, and would be selling the property to a third party. It is not unwarranted to suspect a concern that if Plaintiff knew of an intent to sell the property to a third party, Mr. Gale's clients might have to sell it to Plaintiff at the lower price. Although defendant Gale knew from continuing communications from Plaintiff's attorney that efforts were [*12]still being made to resolve the title issues, he did not even advise Plaintiff that the property had in fact been sold.

It is clear from Mr. Gale's own testimony that he was motivated by his client's demands and interests, as well as his own to the extent of the $50,000 retained by or paid to him, and that he did not consider his contractual and fiduciary duties to Plaintiff. Whether labelled "bad faith," "wilful disregard," or "gross negligence," the evidence of defendant Gale's conduct is sufficient to establish at least a "viable cause of action" against him.

In addition to damages in the amount of the Deposit/Downpayment, Plaintiff would be entitled to pre-judgment interest from "the earliest ascertainable date the cause of action existed." (See CPLR 5001 [a], [b]; see also Astrada v Archer, 51 AD3d 954, 955 [2d Dept 2008]; Nikolis v Resnick, 214 AD2d 658, 659 [2d Dept 1995]; Patrick v Guarniere, 204 AD2d 702, 704 [2d Dept 1994].) Plaintiff suggests the commencement date of this action, September 4, 2004, and that is not unreasonable.

Judgment, however, may be premature. As indicated, the Court has been advised that Plaintiff and the Maynard Defendants have settled, but the Court has not seen any writing reflecting the amount or terms of the settlement. The Court cannot know, therefore, whether that settlement in any way affects the amount that may be recovered from Mr. Gale, who has not, in any event, had the opportunity to render an opinion.

The parties shall appear for a conference at 11:00 a.m. on September 11, 2009, Room

19.45, 320 Jay Street.

August 7, 2009___________________

Jack M. Battaglia

Justice, Supreme Court