The question before this Court is not simply whether the appellant, admittedly acting as an escrow agent, had an obligation to deposit the plaintiffs down payment with the court. Rather, the question is whether, at the point that it became evident to the appellant that there was a dispute as to the ownership of the funds, he breached his fiduciary duty, as the escrow agent now acting for the benefit of both parties, to exercise due care in maintaining the funds pending the outcome of the litigation.
While there may be no express legal or moral obligation to commence an interpleader action, I respectfully disagree with the majority’s conclusion that under the circumstances of this case the appellant, as escrow agent, bore no liability for his unilateral decision to hold the buyer’s down payment in a noninterest-bearing IOLA account pending the outcome of litigation. Significantly, prior to the entry of judgment, the appellant offered the defense that he acted solely as the escrow agent holding the funds in the IOLA account. After entry of judgment, he sought to amend the caption to add “escrow agent” after his name, apparently anticipating his argument on appeal. Although the postjudgment motion was denied, there can be no doubt that the appellant voluntarily assumed the role of escrow agent for the transaction, thereby voluntarily assuming the corresponding fiduciary duties and obligations.
The escrow agent is, in effect, the agent of both parties, and, therefore, acts for the benefit of both parties (see, 99 Commercial St. v Goldberg, 811 F Supp 900, 906; see also, Farago v Burke, 262 NY 229, 233). As a fiduciary, the escrow agent is required to exercise that degree of care which a prudent person of discretion and intelligence would employ in his or her own similar affairs (see, National Union Fire Ins. Co. v Proskauer Rose Goetz & Mendelsohn, 165 Misc 2d 539, 551; cf., King v Talbot, 40 NY 76, 86; cf., Matter of Hahn, 93 AD2d 583, affd 62 NY2d 821). At least one of the duties of fiduciaries is to make the funds in their care productive (see, National Union Fire Ins. Co. v Proskauer Rose Goetz & Mendelsohn, supra).
In the present case, the appellant has attempted to justify his failure to place the funds in an interest-bearing account once the dispute arose by arguing that since the parties had never settled their obligations to each other under the contract, he could do nothing as the escrow agent except hold the down payment until such settlement. This is a simplistic argument which ignores the fact that he is an attorney charged with knowledge of the fiduciary duties of an escrow agent to the parties in a real estate transaction.
*28As an attorney, the appellant was undoubtedly aware of the potential duration of this litigation; as an escrow agent under such circumstances, he had an obligation to handle the funds in a manner beneficial to the buyer as well as the seller. Thus, he should have maintained the productivity of the funds for the benefit of the buyer who, but for the appellant’s initial refusal to return the down payment without verification of the buyer’s “good faith” attempt to secure a mortgage, would have had the use and enjoyment of the funds. Notably, the appellant did not have a right to demand evidence of good faith under the terms of the contract of sale. Nor has the appellant taken issue with the Civil Court’s determination that the buyer acted in good faith and that, as a result, the down payment should have been returned to him upon his request.
It is significant that the appellant is an attorney who is aware of the legal procedural options available to him. While a matter of speculation, it is certainly likely that if the funds held in escrow had belonged to the appellant, he would have taken whatever actions were necessary to maintain their productivity. At the very least, he might have placed the funds in an interest-bearing account. Similarly, as the escrow agent armed with such special knowledge, the appellant had a heightened duty to take appropriate protective action which would satisfy his fiduciary duty to both parties when handling the escrow funds.
By commencing an interpleader action pursuant to CPLR 1006, the appellant could have protected the interests of both parties. The seller’s interest would have been protected because the escrow agent would no longer have any probable obligation to release the funds to the buyer upon the buyer’s demand. Since the funds would have been placed in an interest-bearing account under the supervision of the court, the buyer’s interest would have been protected. In any event, the appellant would have insulated himself from any liability.
Judiciary Law § 497 (5) does not, contrary to the majority’s conclusion, relieve the appellant of liability under these circumstances. Funds which qualify for placement in an IOLA account are those which, in the judgment of the attorney, are too small in amount or are reasonably expected to be held for too short a time to generate sufficient interest income to justify the expense of administering a segregated account for the benefit of the client or beneficial owner (Judiciary Law § 497 [2]). Judiciary Law § 497 (5) provides in relevant part that “[n]o attorney * * * shall be liable in damages * * * because of a de*29posit of moneys to an IOLA account pursuant to a judgment in good faith that such moneys were qualified funds” (emphasis added).
It is conceded that the initial placement of the down payment in the IOLA account was done in good faith, and, therefore, under the plain language of the statute, the appellant may not be held liable because he deposited the funds in that type of account. The breach of fiduciary duty occurred, however, when the appellant, now acting as the escrow agent for both parties, permitted the funds to remain in the short-term account when it became evident to him that there was a conflict between the buyer and seller which would not be resolved without resort to litigation of an indeterminate duration, and that the IOLA account, by definition, would be inadequate to protect the interests of both parties.
In characterizing himself solely as an escrow agent, the appellant misconstrued his role to mean that he should take no action at all. In doing so, he favored his client, the seller, to the detriment of the buyer. I suggest that by his refusal to release the down payment to the buyer until he had evidence of the buyer’s good-faith attempt to secure a mortgage and by thereafter leaving the funds in the IOLA account, the appellant purposefully acted for the benefit of his client, and not as an impartial escrow agent. Thus, the appellant’s characterization is disingenuous. Nevertheless, even if we accept as true that he acted as the escrow agent for purposes of holding the funds pending the outcome of the litigation, we may conclude that the appellant breached his fiduciary duty to the buyer to maintain the productivity of the funds in escrow, and he should bear the burden, along with the seller, for the lost interest.
Bracken, J. P., and Rosenblatt, J., concur with Goldstein, J.; Luciano and Copertino, JJ., dissent in a separate opinion by Luciano, J.
Ordered that the order dated July 5, 1996 is reversed, on the law and the facts, with costs, the judgment of the Civil Court of the City of New York, Queens County, is reversed, insofar as appealed from, the provisions thereof which awarded the plaintiff interest and costs against the appellant are vacated, and the order dated June 13, 1995 is vacated in light of our determination of the appeal from the judgment.