Gray•Duffy, LLP Secures Insurance Coverage for Client in Real Estate Title Dispute, Recovering Full Investment in Property

June 2014

Overview

Michael Eisenbaum of Gray•Duffy’s Encino office convinced the title company to defend the client in a fraud and quiet title lawsuit brought by the prior owner of a residential real property. The firm also negotiated a settlement with the title company to recover the client’s entire investment in the property. The client received a confidential settlement amount in exchange for assignment of his promissory note secured by deed of trust.

Discussion

The firm’s client was the owner of a promissory note secured by a deed of trust on a single-family residential property in Bellflower, California. The client purchased the note from the original private lender, which was in default at the time of the purchase. With the note in default, the client began foreclosure proceedings to collect on the note. However, before the foreclosure sale could take place, the prior owner of the property, who was an elderly woman in a nursing home, filed a lawsuit claiming she had never knowingly transferred the property to the borrower. She sought to recover title to the property, and claimed damages for fraud and elder abuse, contending the firm’s client was involved in a conspiracy to deprive her of title to the property. After Gray•Duffy’s client was sued, the defense was tendered to the title insurance company. Arguing that this was a covered circumstance under the terms of the title policy regarding rightful title ownership, the title company agreed to defend the client, and retained defense counsel on the client’s behalf. As the case progressed, discovery ultimately revealed that the elderly woman’s son was responsible for defrauding his mother in signing the title to her property over to the borrower so he could borrow against the property. After the plaintiff received a preliminary injunction to halt the foreclosure sale, the parties proceeded with mediation. Ultimately, the case resolved with some money being paid by the plaintiff to have the note assigned to her to recover the property. The amount of money the plaintiff could pay was insufficient to cover the client’s investment in the note. Thus, on behalf of the client, Mr. Eisenbaum negotiated a separate settlement with the title company, which made the client whole as to his original investment, plus interest and a portion of his attorneys’ fees.

Please Note: This article is necessarily general in nature and is not a substitute for legal advice with respect to any particular case. Readers should consult with an attorney before taking any action affecting their interests.