Elysian Investment Group, LLC v. Stewart Title Guaranty Company

This case presents the question: Does the recording of a “notice of buildings, structures, or premises classified as either hazardous, substandard or a nuisance” comprise either a “defect in or lien or encumbrance on the title” or an “unmarketability of the title” within the meaning of those terms of coverage in a title insurance policy? The trial court concluded that it did not. We affirm.

In April 1998, Elysian Investment Group, LLC (Elysian), purchased a residence in Los Angeles from Countrywide Home Loans, Inc. (Countrywide). The garage had been converted to a second dwelling unit. The property was acquired by Countrywide through foreclosure and was sold “as is.” At the time of the sale, Countrywide was aware that the second unit had been converted without permits and would have to be reconverted to a garage.

In connection with Elysian’s purchase of the property, Stewart Title Guaranty Company (Stewart) issued a standard California Land Title Association (CLTA) policy of title insurance, insuring against loss or damage sustained by Elysian by reason of title being vested other than in Elysian, any defect in or lien or encumbrance on title, unmarketability of title,…