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Court Dismisses Claim by Property Owner for a Title Company’s Negligent Preparation of a Deed of Trust

In Park v. First American Title Company, a Court dismissed a property owner's lawsuit despite the title company's negligent preparation of a deed of trust.  In Park, plaintiff sold her property located in Fresno, California for $7.3 million.  She took back a second deed of trust in the amount of $2.45 million.  First American Title Company prepared the grant deed, deed of trust and promissory note.  Subsequently, the buyers defaulted on the loan and a notice of default was recorded.  First American advised plaintiff that it had made an error in the deed of trust in that the buyer was listed on the deed of trust as an individual, but on the grant deed as a corporation.  Nevertheless, First American advised the plaintiff that she could pursue the foreclosure sale.  Subsequently, First American advised the plaintiff to accept a settlement offer with the buyers, which plaintiff declined.  First American then refused to proceed with the foreclosure sale given the discrepancy between the two deeds.  First American then obtained a reformation of the deed of trust and moved forward with the foreclosure sale.  It took approximately 20 months from the time of the buyers' default to the actual foreclosure sale due to the corrections in the deed.  The plaintiff purchased the property at the foreclosure sale and then sued First American for negligence, fraud and breach of fiduciary duty.

First American moved for summary judgment asserting that the plaintiff had not proven that the plaintiff had a ready, willing and able buyer who could have purchased the property, but for the delay in the foreclosure proceeding.  The trial court agreed and granted the motion for summary judgment dismissing the case.  The appellate court affirmed holding that for plaintiff to allege negligence arising out of the delay of the foreclosure proceeding, plaintiff either had to provide an offer from a potential purchaser or provide a potential purchaser who had the financial ability to satisfy the seller's terms.  Instead, the plaintiff provided a declaration from a real estate broker representing that they had a willing purchaser.  The court stated that this was insufficient and that an actual offer had to be presented.

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