Park

We decide an issue of first impression: Whether, under California Business and Professions Code § 10471(a), a title insurance company that satisfied its obligations to its insured following embezzlement by a mortgage broker is entitled to payment from the State of California Department of Real Estate Recovery Account to recover a portion of an unsatisfied judgment against the embezzling brokers. We hold that it is not.

Appellant, Stewart Title, is a title insurance company that insures the condition of real estate title for lenders, property owners, and purchasers involved in real estate transactions. During the relevant period, Stewart Title insured several lenders who loaned money to property owners seeking to refinance existing loans through Mortgage Link, a mortgage broker. The new loans were to be secured by a first lien position. Mortgage Link acted as an escrow holder for the refinanced transactions. As the escrow agent, Mortgage Link was required to pay off existing liens on the refinancer’s properties so that the refinanced loans would be secured by first trust deeds. Mortgage Link received the funds for the escrow accounts, but rather than paying off existing liens,…