First American Title Insurance Company v. Network Capital Funding Corporation, 5:24-cv-00358

First American Title Insurance Co. (First American) issued a lender’s title insurance policy to Network Capital Funding Corp. (Network Capital) for a home equity loan secured by property believed to be owned by Robert A. Johnson.
A fraudster impersonating Johnson obtained the loan and executed a forged Deed of Trust; neither party was aware of the fraud at closing.
First American issued the title insurance policy after its agent and Network Capital’s closing attorney presented the forged deed as valid.
Network Capital later discovered the forgery and submitted a claim under the title policy for its resulting loss.
First American sought to rescind, reform, or avoid the policy, and for a declaratory judgment of non-coverage; Network Capital moved to dismiss for failure to state a claim.
The court consolidated the parties' motions, analyzed only the 12(b)(6) claims, and dismissed all of First American’s claims.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Recission for Mutual Mistake	Mutual mistake about forging of deed justified rescinding the policy	Policy covers forgery risk; plaintiff assumed risk by issuing policy	No basis for recission; mistake not mutual in the legal sense, risk assumed
Reformation of Policy	Policy should be reformed to include an exception for the unfulfilled requirement	No material stipulation omitted; policy reflects true parties' intent	No grounds for reformation; no omitted stipulation agreed by both parties
Avoidance under N.C. Gen. Stat. §58-3-10	False representations about authorization/execution of deed allow avoidance	No actionable misrepresentation in application; fails on Rule 9(b) pleading	No actionable misrep under statute or Rule 9(b); claim dismissed
Declaratory judgment of non-coverage	Claims support declaration of non-coverage under policy	Arguments fail; claims rest on failed legal theories	No basis for declaratory relief; claim dismissed

Ashcroft v. Iqbal, 556 U.S. 662 (standard for facial plausibility in pleadings under Rule 12(b)(6))
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard under Rule 12(b)(6))
Mayfield v. Nat’l Ass’n for Stock Car Auto Racing, Inc., 674 F.3d 369 (pleading standard for judgment on the pleadings)
Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250 (standards for dismissing claims that are conclusory or bare assertions)
MacKay v. McIntosh, 270 N.C. 69 (doctrine and requirements of mutual mistake for contract recission)
Hinson v. Jefferson, 287 N.C. 422 (caution against applying mutual mistake theory post-completed sale of property)
Marriott Fin. Servs., Inc. v. Capitol Funds, Inc., 288 N.C. 122 (construction of insurance policy; assumption of risk in contract law)
Maddox v. Colonial Life & Acc. Ins. Co., 303 N.C. 648 (strict construction of insurance coverage exclusions)
Sills v. Ford, 171 N.C. 733 (standards for reformation of contract in equity)
Matthews v. Shamrock Van Lines, Inc., 264 N.C. 722 (requirements for equitable reformation of a written instrument)
Swartzberg v. Rsrv. Life Ins. Co., 252 N.C. 150 (principles for avoidance of an insurance policy for false representations)
Goodwin v. Invs. Life Ins. Co. of N. Am., 332 N.C. 326 (materiality of representations in insurance applications)
Woods v. Nationwide Mut. Ins. Co., 295 N.C. 500 (courts may not rewrite insurance contracts or impose unbargained-for terms)