Metropolitan News-Enterprise


Thursday, June 22, 2006


Page 3


Identity Theft Victim Held Entitled to Surplus Proceeds of Foreclosure Sale


By a MetNews Staff Writer


An identity theft victim whose name and personal information were used without authorization to acquire real property is entitled to the surplus funds from a foreclosure sale of the property where she is the sole claimant to those funds, this district’s Court of Appeal ruled yesterday.

Div. Five unanimously reversed an order by Los Angeles Superior Court Judge Alan S. Rosenfeld directing that undistributed surplus funds from a trustee sale be paid into the Los Angeles County general fund.

Rosenfeld issued the order after rejecting Aurora Lepe’s sole unopposed claim to the undistributed surplus funds on the grounds that Lepe was not the actual trustor of the property and had no connection to it.

But the panel agreed with Lepe in her unopposed appeal that she had an equitable right to the surplus funds generated by the trustee sale, because her name and social security number had been used fraudulently to obtain funding for the purchase of the property.

An unknown perpetrator had used Lepe’s name and personal information to obtain a purchase money loan for property secured by a deed of trust, signing Lepe’s name on a promissory note as maker and on a deed of trust as trustor. Upon foreclosure of the deed of trust, CTC Real Estate Services as trustee sold the property and was left with a surplus of $51,333.87.

CTC filed a petition and declaration regarding the surplus funds, saying Lepe was equitably entitled to the funds but that since she was not the actual borrower and trustor of the foreclosed deed of trust, it was unable to distribute the funds to her. Rosenfeld granted CTC’s request that the court deposit the surplus funds less its attorney fees and costs and discharge it from further responsibility.

Writing for the appellate panel, Justice Richard M. Mosk said that Lepe had an equitable right to the surplus funds under the “peculiar circumstances” of the case, where the facts were undisputed and Lepe’s was the sole unopposed claim to the funds.

“The mere fortuity that the wrongdoer has disappeared without receiving the surplus and is not subject to legal action should not, as a matter of equity, preclude Ms. Lepe from being able to recover the funds not in the possession of the identity thief,” he wrote.

“Although one might argue she is gaining a windfall,” the justice said, “a victim is entitled to trace stolen assets into other assets and obtain the final product even though it may exceed the value of that which was stolen.”

Mosk added that there was evidence Lepe suffered “substantial damage” as a result of the theft, including a Chapter 13 bankruptcy proceeding filed in her name without her knowledge, a damaged credit record, and the inability to borrow money for a home she intended to purchase.

The case is CTC Real Estate Services v. Lepe, B185320.


Copyright 2006, Metropolitan News Company