Security Service Federal Credit Union v. First American Title Insurance

MEMORANDUM

California’s Subdivided Lands Act requires sellers of land subdivided into five or more lots to obtain a final public report (“FPR”) from the California Department of Real Estate (“DRE”) before selling any of the subdivided lots. Cal. Bus. & Prof. Code §§ 11000 , 11010, 11018.2. Rindles-bach Family, LLC, owned unimproved real property in Riverside, California, which was subject to the FPR requirement because it consisted of thirteen subdivided lots. Gilger Homes, LLC, optioned the property from Rindlesbach and pursued an FPR using First American Title Insurance Company as its “single responsible party” for communications with DRE. In that role, First American submitted Gilger’s application to DRE. However, Gilger abandoned the project, and Rindlesbach sold twelve of the lots to individual buyers despite the fact that no FPR had been issued.

New Horizons Community Credit Union financed the purchase of each of the twelve lots. For each loan, New Horizons purchased an American Land Title Association (“ALTA”) lender’s title insurance policy from First American. These policies insured New Horizons and any succeeding owner of the indebtedness. The polices covered, among…