## Facts

- Richard Kirschner owned a 1981 Mercedes-Benz insured by State Farm for theft.
- The Mercedes was stolen, and State Farm paid the theft loss (about $41,000); Kirschner transferred title to State Farm.
- Thieves altered the vehicle identification number (VIN) and used paperwork to obtain California DMV title documents under the altered VIN.
- A wholesale dealer presented the stolen Mercedes at a CADE auction; the auction entity lacked knowledge of the theft.
- The Mercedes was sold through multiple transfers to purchasers who lacked notice of the theft; Suburban Motors eventually acquired the vehicle and leased it to a third party.
- The California Highway Patrol later identified the Mercedes as stolen and transferred possession to State Farm.
- Suburban Motors claimed superior title as a bona fide purchaser for value based on the DMV documentation and apparent chain of title; State Farm claimed superior title derived from the lawful owner.

## Issues

1. Whether a bona fide purchaser for value can obtain superior title to a stolen vehicle when the purchaser relies on DMV-issued title documents procured through a fraudulently altered VIN.
2. Whether the theft insurer’s title, acquired by assignment from the lawful owner after paying the theft loss, prevails over a downstream purchaser’s chain of title traceable to a thief.

## Decision

- The Court of Appeal reversed the summary judgment that had declared Suburban Motors the valid titleholder.
- The court held State Farm’s title, obtained from the lawful owner, was superior to Suburban Motors’ claimed title.
- The court directed entry of judgment for State Farm.

## Legal Principles

- A thief cannot pass good title; title derived from theft is void, so later transferees generally cannot acquire better title than the thief possessed.
- DMV issuance of registration or title documents does not cleanse a theft-based chain of title created through VIN alteration and fraudulent paperwork.
- Bona fide purchaser protections do not override the void-title rule in a pure theft case; losses fall on downstream market participants rather than the original owner or the owner’s assignee.
- An insurer that pays a theft claim and takes an assignment of title stands in the lawful owner’s shoes and retains the owner’s superior rights against subsequent claimants.

## Conclusion

The court held that a downstream good-faith purchaser relying on DMV paperwork obtained through VIN fraud cannot defeat the superior title of a theft insurer that acquired title directly from the lawful owner after paying the theft loss.


Suburban Motors, Inc. v. State Farm Mut. Auto. Ins. Co., 218 Cal. App. 3d 1354, 268 Cal. Rptr. 16 (Ct. App. 3d Dist. 1990)