The Court of Appeal of Louisiana, Third Circuit, recently reversed the judgment of the trial court and held that a title insurance policy insured against the judgments of the plaintiff’s co-owner that attached to the property when plaintiff and the co-owner purchased the property. See DeGueyter v. First American Title Co., 230 So.3d 3562 (La. App. 2017). On August 1, 2014, plaintiff and her brother-in-law purchased a one hundred percent undivided interest in a property, and the conveyance was recorded on September 3, 2014 at 4:09 pm. In connection with the sale, plaintiff and her brother-in-law purchased a title insurance policy from defendant title insurance company, which stated that the policy was in effect as of “09/03/2014 @ 04:09 p.m. or the date of recording, whichever is later.” On September 2, 2014, however, the brother-in-law transferred his entire undivided interest to plaintiff, and this conveyance also was recorded on September 3, 2014 at 4:09 pm. The next year, when applying for a mortgage, plaintiff discovered ten judgments and tax liens against the brother-in-law that had attached to the property upon their purchase. Plaintiff made a claim with defendant, but defendant denied the claim. Plaintiff then filed this action and the parties cross-moved for summary judgment. The trial court denied plaintiff’s motion and granted defendant’s, holding that plaintiff “has clear and unencumbered title on her undivided one-half interest in the . . . property[.]” On appeal, the appellate court reversed.
First, the Court held that the judgments and other liens preexisted the purchase of the property and automatically attached on the date of purchase, and thus were attached to the property as of the date defendant issued the policy. Second, the Court held that these encumbrances rendered plaintiff’s title unmarketable and was an insurable risk under the language of the policy. Third, the Court found that defendant’s argument that plaintiff had clear and unencumbered title on her undivided one-half interest in the property “ignores the stark reality that third parties possess outstanding rights of a ‘substantial nature against the property,’ which effectively renders title in the property unmarketable.” Finally, the Court held that there was nothing in the record to indicate plaintiff was aware of these liens, and therefore they were not “created, suffered, assumed, or agreed to by [her].” Thus, the Court held that plaintiff was entitled to summary judgment and reversed the trial court.