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Real Estate & Lease Litigation: October 2013 Archives

Misuse of Escrowed Funds Lands Contractor in Prison

In an apparent case of first impression, the Massachusetts Appeals Court has ruled that a building contractor who misuses his customers' escrowed funds incurs not only civil liability for breach of contract and the like, but also criminal liability for "fiduciary embezzlement" (M.G.L. c. 266, ยง 57).  In Commonwealth v. DeGennaro, 84 Mass. App. Ct. 420, decided October 21, 2013, the defendant contractor executed purchase and sale agreements with a series of customers that required the customers to pay deposits, and required the contractor to hold those deposits in escrow.  The defendant contractor acted as his own escrow agent.  However, instead of placing the escrowed deposits into a separate, interest-bearing bank account, the defendant deposited them into his general business operating accounts.  Worse, the defendant then used the money--before it had been earned--to pay himself and to pay various business expenses.  The defendant never built the houses he was hired to build, and he never returned the escrowed deposits to his customers.

Appraisers Have Final Say on Lease Extension Rent

A panel of the Massachusetts Appeals Court recently grappled with the reviewability of rent-setting calculations performed by professional appraisers pursuant to a commercial lease, and determined that even mistaken appraisers will have the last word so long as they apply any criteria or formula set forth in the lease, and do not exceed the authority the parties have granted them.

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