The ethical principle behind escrow funds is simple—the funds belong to a client or a third party, not the attorney. The attorney, who is a fiduciary, cannot commingle escrow funds with the attorney’s own funds. Escrow funds cannot be used for any personal purpose of the attorney. 22 NYCRR 1.15(a).

Appellate Division rules (22 NYCRR 1300.1) set forth requirements for dishonored and overdraft check reporting. Banks must agree to report any case in which an instrument (almost always a check, so I will use that term) drawn on an escrow account is presented for payment and there are insufficient funds to pay the check, regardless of whether the bank pays or bounces the check. The rule applies only if the check is otherwise properly payable. See Monreal v. Fleet Bank, 95 N.Y.2d 204 (2000); UCC 4-401.

Roping in the Banks

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