Heritage Oaks Partners v. First American Title Insurance

In this case of first impression, we hold that in a nonjudicial foreclosure sale, a trustee who allegedly is negligent in believing that it is the trustee of record, and who conveys title to a successful bidder, owes no duty to subsequent purchasers of the property.

Heritage Oaks Partners et al. (Heritage Oaks) appeal from the summary judgment granted in favor of First American Title Insurance Co. (First American) in this action for negligence and equitable indemnity. Heritage Oaks bought real property from Union Bank after the bank had acquired title at a foreclosure sale conducted by First American. At the time of the foreclosure sale, a substitution of trustee had been recorded naming Union Bank, not First American, the trustee under the relevant deed of trust. The prior owners sued, alleging the foreclosure sale was void because it had not been conducted by the trustee of record. They prevailed in the trial court. Heritage Oaks, the subsequent purchaser, settled with the prior owners. First American and Union Bank appealed. We reversed that judgment and reformed the deed of trust to validate the foreclosure sale. (Jones v. First American Title Ins. Co. (2003) 107…