Opinion ID: 773368
Heading Depth: 2
Heading Rank: 1

Heading: Aggrieved Person

Text: 16 Although neither our circuit, nor the California courts, have dealt directly with the question of whether a title insurance company can qualify as an aggrieved person under the recovery statute, a relevant core principle has emerged from the pre-existing cases discussing this statute. In construing the term aggrieved person, we have always looked to the general purpose of the act of which the statute is a part. Lorenz v. Sauer, 807 F.2d 1509 (9th Cir. 1987); Middlesteadt v. Karpe, 52 Cal.App.3d 297, 302 (Cal. Ct. App. 1975). The primary purpose of the real estate act is to protect the public by improving standards in the real estate profession by requiring fair and ethical behavior by licensees who are unable to respond to damage awards. Lorenz, 807 F.3d at 1512. 17 The leading California case construing the term aggrieved person is Middlesteadt. 52 Cal.App.3d 297. The case involved a licensed real estate agent who had been defrauded by another licensed real estate agent and sought to recover from the fund. Denying recovery, the court held that because the case involved an internal business dispute not involving any fraud or deceit perpetrated on clients, recovery by the broker would not further the consumer protection purpose of the statute. Middelsteadt also reasons that real estate licensees do not need the protection provided by the fund since they themselves are in a better position than the general public to guard against the deceitful and fraudulent acts of their colleagues. The California court states: [i]n light of the state policy underlying the real estate act, the broad provision of section 10471 must be read to the effect that the aggrieved person who is entitled to compensation from the Recovery Fund must be a client or a member of the general public. Id. at 302. 18 Here, Stewart Title was not aclient of the defrauding broker, Mortgage Link. Rather, Stewart Title is a title insurance company in the business of insuring, guaranteeing or indemnifying owners of and lenders secured by real property. Furthermore, Stewart Title is not a vulnerable member of the public unable to protect itself from the deceitful conduct of real estate licensees. As an insurance company, Stewart Title charges a premium in exchange for assuming the title risk involved in this dispute. Unlike a client or member of the general public Stewart Title has the ability to absorb, spread and minimize the risk of damage that results from faulty titles. Thus, under the plain meaning of aggrieved person as discussed in previous case law, Stewart Title does not have a direct right of recovery from the fund.