Vestin Mortgage, Inc. v. First American Title Insurance Company

Vestin Mortgage, Inc. (Vestin) (plaintiff), a mortgagee, bought title insurance from First American Title Insurance Company (First American) (defendant); at that time, the town had already passed and recorded an ordinance creating a special improvement district (SID) covering the mortgaged property, though the town only began levying a special SID tax after First American issued the policy. When the borrower defaulted and Vestin foreclosed, it learned of the SID ordinance and that a buyer of the property would immediately owe an accelerated SID tax; a prospective buyer declined the property after Vestin disclosed this. Vestin sued First American, arguing the title insurance covered the SID tax assessment; both the trial court and appellate court ruled for First American, and Vestin appealed.