WFG National Title Insurance Company v. Wells Fargo Bank, N.A.

Facts: A bank holds a first trust deed on a property which is in default. The bank records a notice of default (NOD), commencing foreclosure. A foreclosure sale is scheduled but does not take place. A forged trustee’s deed is recorded, conveying the property to a third party. The third party sells the property to a collaborating buyer who records a purchase-assist mortgage originated by a mortgage lender. The mortgage is insured by a title insurance company. The mortgage lender discovers the fraudulent scheme and makes a claim on the title insurance company’s policy to cover their loss on the mortgage. The title insurance company covers the loss resulting from the forged trustee’s deed.

Claim: The title insurance company seeks to quiet title from the effects of the bank’s trust deed, claiming the trust deed they insured has priority since the bank had a duty to determine a trustee’s deed under the bank’s trust deed was forged and prevent third parties from relying on it.

Counterclaim: The bank claims the title insurance company holds no interest in the property since it is based on a forged conveyance of title and they had no duty to monitor or correct public records regarding the property.

Holding: A California court holds the title insurance company acquired no security interest in the property under the forged trustee’s deed and the bank had no duty to monitor public records for documents affecting title to the property. [WFG National Title Insurance Company v. Wells Fargo Bank, N.A. (July 10, 2020)­_CA6th_]

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