If you want to read the TOS,
https://www.escrow.com/escrow-101/general-escrow-instructions
it is all there. Or you may keep repeating the same thing which just shows that you panicked, understandably, I am not blaming you, but without legal reason.
It's in the escrow TOS, and the email sent to seller should have had this verbiage somewhere in the email:
The buyer is responsible for 100% of the escrow fee in the event the transaction is cancelled or the merchandise is returned. During the Buyer Inspection Period, Buyer may reject for any reason by selecting the "Reject" button on the Escrow.com site and following all other instructions to properly reject the merchandise. Upon such rejection, Escrow.com will send Seller an email stating Buyer's decision to reject and return the goods; and Buyer agrees to promptly ship goods to Seller within ten (10) calendar days of formal rejection and insure, at Buyer's expense, the item(s) to the place designated by the Seller in the Seller's profile. Buyer will be responsible for shipping damage if insurance is not purchased. Buyer is aware that merchandise must be rejected in the manner described in order to obtain a refund of the purchase price.
Buyer is aware that regardless of the reason for rejection, Escrowed Property must be returned to the Seller in order for funds to be returned to the Buyer.
In Transactions where the Escrowed Property is a domain name, if a Buyer rejects a domain name (which is not being held by Escrow.com pursuant to a separate holding agreement) within the Inspection Period, return of the domain name from Buyer to Seller must be initiated within ten (10) days of Buyer's rejection. Failure of Buyer to reject or initiate return of the domain name within the specified time periods will cause the Escrow Holder to automatically pay the Seller the purchase price. Seller agrees to cooperate in the return process of the domain. In the event the domain transfer to the Buyer has caused a ICANN imposed registrar lock, the Buyer and Seller agree that the Seller will open an account at the receiving registrar to take possession of the domain or that the funds will be held in escrow until this period expires and the domain can be returned to the Seller’s registrar.
Basically, seller knew or should have known the above. Buyer knew or should have known the above. But whether they knew or not, this is what would have applied:
Upon cancellation request Buyer would have had to return the domain to Seller, or else funds would have eventually been released to Seller. And seller was required by escrow TOS to cooperate to get the domain back, which is why escrow asked him to ask buyer to return it. It was a legitimate request from escrow to ask Seller to try to get the domain back, not any sort of thief protection. That's it, all in black and white, accusations from Seller aside.
You guys may just keep arguing all day long about what "shoulda been" or, just read the escrow.com TOS and know, for future reference, how it works.