Title Insurance Co. of Minnesota v. Comerica Bank-California

First National Mortgage Company (FNMC) made two loans to Helen Nastor, secured by deeds of trust. Title Insurance Company (Title) (plaintiff) issued a policy of land title insurance for the loans. On the first loan, FMC issued a check payable to Nastor and gave the check to Nastor’s son, Rudy. Someone impersonating Nastor indorsed the check and presented it to the drawee bank, Comerica Bank-California (the Bank) (defendant). The Bank paid the check to the impersonator. FNMC then made a second loan to Nastor. Part of the proceeds were used to pay off the first loan, and the remainder were issued in a check payable to Rudy. FNMC issued the check to Rudy based on a forged power of attorney purporting to grant Rudy power of attorney over Nastor. No payments were made on the second loan, and FNMC initiated foreclosure proceedings against Nastor’s property. Nastor’s attorney informed FNMC that the deeds of trust were invalid, because they were signed by Rudy using the forged power of attorney. FNMC made a claim against the title insurance policy, which was paid by Title. Title, acting as subrogee of FNMC’s claims, then sued the Bank for negligence. Title asserted that the Bank improperly paid the first check to Nastor’s impersonator and, therefore, failed to inform FNMC of the fraud. Title asserted that FNMC would not have made the second loan if the Bank had informed FNMC of the imposter that cashed the check payable to Nastor. The trial court dismissed the complaint based on the imposter rule under the Uniform Commercial Code (UCC). Title then appealed to the Court of Appeal for the Sixth District of California.