Mark Freedman, individually and derivatively on behalf of Pinewood Terrace, LLC, plaintiff,
Uri Hason, appellant; Chicago Title Insurance Company, nonparty-respondent.
Jonathan Fisher, New York, NY, for appellant.
Fidelity National Law Group, New York, NY (Brian S. Tretter
of counsel), for nonparty-respondent.
C. BALKIN, J.P. SYLVIA O. HINDS-RADIX COLLEEN D. DUFFY
FRANCESCA E. CONNOLLY, JJ.
DECISION & ORDER
from an order of the Supreme Court, Nassau County (Stephen A.
Bucaria, J.), entered August 24, 2016. The order denied the
defendant's renewed motion to direct the release of
certain escrow funds to the plaintiff pursuant to a
stipulation of settlement between the plaintiff and the
defendant, directed that those funds be released to nonparty
Chicago Title Insurance Company, and authorized the plaintiff
to enter judgment against the defendant in the sum of
"$725, 000, less any amounts paid pursuant to the
settlement agreement, with interest from February 16,
that the order is affirmed, with costs.
plaintiff, Mark Freedman, and the defendant, Uri Hason, were
formerly business partners who owned and developed real
property in the name of limited liability companies,
including Northwood Village, LLC (hereinafter Northwood
Village). On October 27, 2010, nonparty Unique Designs by
Uzi, Ltd. (hereinafter Uzi), obtained a judgment in the sum
of $347, 845.15 against Northwood Village based upon a
confession of judgment signed by Hason. The judgment
contained a discrepancy in that, while the caption read
"Northwood Village, LLC, " the body of the judgment
stated that Uzi would recover the sum of $347, 845.15 from
"Northwood Estates, LLC." The judgment was docketed
under "Northwood Estates, LLC."
November 2012, Freedman commenced this action against Hason
alleging breach of contract. Thereafter, by contract dated
September 4, 2014, Northwood Village sold real property to a
nonparty for the sum of $725, 000. Of that sum, $365, 000 was
placed in escrow with Hason's attorney, Jonathan Fisher,
and the remaining $360, 000 was held in escrow by the
purchaser's attorney, Rothkrug & Rothkrug. The
contract stated that the purpose of the escrow was "to
pay the debts and expenses of Seller, " but did not
specify what those debts were.
judgment for the sum of $347, 845.15 against Northwood
Village was not found in any title searches because the
judgment was docketed under the name Northwood Estates, and
the nonparty-respondent Chicago Title Insurance Company
(hereinafter Chicago Title) insured the title without an
exception for Uzi's judgment lien. Uzi's judgment was
not corrected until December 11, 2014. At that juncture, its
existence became known to Chicago Title, which purchased the
lien from Uzi.
February 16, 2016, Freedman and Hason entered into a written
agreement settling this action. The agreement provided that
"Hason shall pay to Freedman or his designee, the sum
of... $725, 000 (the Settlement Payment') to be paid from
funds held in escrow. Such payment shall be made by Jonathan
Fisher, Esq., and Simon Rothkrug, Esq., in immediately
& Rothkrug refused to release the funds it was holding in
escrow, because Chicago Title had asserted a claim against
those funds in the sum of $347, 845.15. Hason moved to direct
the release of the funds from escrow, asserting that the
judgment was not a valid lien on the real property sold by
Northwood Village because it was improperly docketed under
the name "Northwood Estates." Hason's original
motion for that relief was denied by order entered April 13,
2016, with leave to renew upon papers showing that the
judgment was not a lien on the property. Hason renewed his
motion, arguing that the judgment was not a lien on the
property because it was not corrected until December 2014,
after the property had been sold.
Supreme Court denied the renewed motion on the ground that
"[b]oth Northwood Village and Hason, who signed the
confession of judgment, had actual knowledge of the judgment
at all times." The court directed that the escrow funds
be released to Chicago Title, and authorized Freedman to
enter a judgment against Hason in the sum of "$725, 000,
less any amounts paid pursuant to the settlement agreement,
with interest from February 16, 2016." Hason appeals.
contention that the proceeds of a sale of real property to a
bona fide purchaser for value are free of any claims by
creditors of the recipient of the proceeds is without merit.
Rather, when a plaintiff cannot follow the land because it
was sold to a bona fide purchaser for value, the plaintiff
may follow the money to assert a claim against the proceeds
of the sale (see Moony v Byrne, 163 NY 86). Where a
debtor places funds in escrow for the payment of specific
creditors, as long as those funds remain subject to the
debtor's "present or future control, " those
funds are subject to claims brought by other creditors who
know about the escrow funds (Potter of MacLean, 75
A.D.3d 686, 687 [internal quotation marks omitted];
Koroleski v Badler, 32 A.D.2d 810, 811).
the funds held in escrow were not transferred to anyone at
the time of the sale. More than a year later, in February
2016, Hason agreed to transfer the funds to Freedman,
demonstrating that Hason retained control over the funds. The
judgment held by Uzi and assigned to Chicago Title was a
superior claim to the contract right of Freedman to those
funds. Accordingly, Hason's renewed motion to direct the
release of the escrow funds to Freeman was properly denied.
settlement agreement explicitly stated that the agreed-upon
sum of $725, 000 was to be paid out of funds held in escrow.
As a result of the prior claim of Chicago Title, that sum
cannot be paid in full from the funds held in escrow, so that
performance of the settlement agreement pursuant to its terms
is impossible. The settlement agreement is a contract,
subject to contract defenses, including impossibility of
performance. Impossibility of performance arises when a party
cannot perform a contract due to circumstances beyond that
party's control (see Matter of Rebell v Trask,
220 A.D.2d 594). "[T]he impossibility must be produced
by an unanticipated event that could not have been foreseen
or guarded against in the contract" (Kel Kim Corp. v
Central Mkts., 70 N.Y.2d 900, 902). Here, seizure of the