While the number of incidents of wire fraud related to real estate transactions has risen, not much has been said about the fixing of liability. Many of us just assume that real estate firms and their agents will be among those being sued. One such suit was recently filed in Los Angeles County Superior Court. Both the plaintiff and the nature of the complaint are somewhat surprising.
The case (First American Title Co. v. Tanisha Zapata et al.) was filed May 16 of this year. There is a long list of defendants [collectively, "The Fraudsters"] along with 100 John Does. Many of them are business entities in the People's Republic of China. (We should probably not expect their representatives to show up in Los Angeles Superior Court.) Included in the list of defendants are a real estate agent (Mark) and a Southern California real estate firm (Realty). The plaintiff, First American Title Company (FATC) is suing in relation to its provision of escrow or settlement services. It is not about title insurance.
According to the complaint, the relevant events were as follows: Mark represented a Mr. and Mrs. Vu as sellers of a property in Redondo Beach, California. FATC acted as the escrow agent. "On or about March 15, 2016, one or more of the Fraudsters … sent an email to FATC's escrow from Mark's email account purporting to be from Mark. [It advised] that Vu had problems with his bank, Bank of America, and that the funds should be wired to an account at Chase Bank… FATC honored the instruction and upon the close of escrow on March 16, 2016 wired $513,708.45 to Chase Bank for an account of TZ."
The complaint goes on, "Although unknown by FATC at the time the funds were wired, FATC is now informed and believes that the email instruction was not from Mark and was not genuine because on March 18, 2016, FATC was informed by the listing agent, Mark, that the sellers, VU, had not received the sales proceeds via wire transfer as directed. The sellers, Vu, filed a police report with the Glendale Police Department."
Subsequent investigation has shown that the registered agent of TZ is located in Florida. During the period March 16 -- March 18, 2016, 5 other money transfers, totaling $487,500, went into the account of TZ and were then credited to various accounts in the People's Republic of China..
Somehow, FATC was able to recover $186,380 of the amount it had thought it was sending to Vu. That reduced the total loss to $327,328.45. Vu has assigned to FATC all claims arising out of the transaction and events as described. Thus this suit.
Naturally, the primary causes of action -- fraud, conspiracy, unjust enrichment, etc. -- are against the Fraudsters and the John Does. Good luck finding them. But there are also causes of action against the real estate agents and the firms involved. And what might those charges be? Negligence and violation of California Civil Code 1798.81.5.In short, Mark and his company are charged for failing to "…implement and maintain reasonable security procedures and practices to protect the personal information of Vu from an unauthorized access, use, modification, or disclosure."
Now, we know that anyone can sue anyone for just about anything. And, at this point, we don't know if there really is anything to this suit. We certainly don't know if FATC followed any industry practices to verify the last-minute instructions they received. But we do know that getting named in a suit is -- even if subsequently dismissed -- the beginning of a series of events that no one calls fun.
Best advice: as early as possible in a transaction, try to ensure that all parties are on board as to precautionary procedures when it comes to wiring instructions.
Also See:
Bob Hunt is a director of the California Association of Realtors®. He is the author of Real Estate the Ethical Way. His email address is This email address is being protected from spambots. You need JavaScript enabled to view it..
