An identity thief stole the identity of a Los Angeles woman named Aurora Lepe and used her information to buy a house and take out a mortgage. The thief didn't pay the mortgage, and disappeared. In 2004, Ms. Lepe wanted to buy a house and applied for a loan available only to first-time homebuyers. She discovered the thief's work when her lender told her that according to her credit report, she already owned a house.
After the thief disappeared, the lender foreclosed on the house that the thief had obtained in Ms. Lepe's name. Surprise! At the foreclosure sale the house sold for a lot more than the amount owing on the loan, and after paying all the costs, $51,333.87 was left over. Who should get the cash?
Ordinarily the surplus would go to the foreclosed homeowner, but that was the thief, who as a careful identity thief should, didn't leave her name or a forwarding address. Ms. Lepe stepped forward and said, "Even though it wasn't exactly my house, it was bought with my identity and ruined my credit report, so I have more right to the $51,000 than anyone else involved." The trial court, though sympathetic, said that as Ms. Lepe wasn't the woman who bought the house, she wasn't entitled to the surplus, and it ordered the $51,000 paid into the general fund of the City of Los Angeles. Ms. Lepe, who was the only claimant, appealed, and last month the California Court of Appeal gave her the $51,000. (Here's the opinion, in PDF.) The court cited the principle that a victim of a theft is entitled to trace the proceeds of the theft into other property (for example, if someone steals money from you and uses it to buy a car, you can recover the car from the thief). Here, the court said, the thief stole Ms. Lepe's name and credit history and used them to buy the house, so the house was proceeds of the theft, and Ms. Lepe could get the surplus as some compensation for what she'd gone through.