Legal Question in Real Estate Law in California

Re: Liability of Seller when Title Co. or Escrow Co. breaches contract

First, you need to defend yourself ANY time you are served with a lawsuit; failure to defend will result in a default judgment against you.

On the fact presented, it looks as though you may be secondarily (at least) liable since you were the borrower and received the benefit of the loan originally. However, the bigger question is, if the second lender didn't get the money, who did? Perhaps it was paid in error to the PRIOR holder of the second. Perhaps the new holder didn't file a request for notice of default or otherwise give notice of its acquisition of the note.

Since it is now the middle of March, you are probably well along into the legal battle, but in any case you need a real-estate lawyer that practices in the county where the property is located, which I would assume is also the county where the suit was filed.

Re: Liability of Seller when Title Co. or Escrow Co. breaches contract

Make sure you know what happened to the money. If you received it at closing, you owe it; contact the creditor, explain the confusion and work out a payment plan where you don't have to pay additional costs, other than interest. If the escrow company still has the money, then they should take care of everything; perhaps they conveyed the property to the buyer, and retained the payoff amount. Finally, make sure this is not a scam from an unscrupulous debt collector. If it is a scam, contact the California Attorney General and the police.

Assuming this is a legitimate claim, for money which you borrowed, then you are legally responsible to pay it, and you can claim reimbursement from whomever else held the money.