Whats it take for a Dismantled Title?

[BSOD2600]

The brother is looking for a late model Subaru and he found a 98 GT w/62K miles. We went to test drive it and it looks great and drives fine. After talking with the current owner, we learned he got the car from a mechanic friend because he owed him money. His friend had fixed the car, after it was in a 'small accident'. Hood, light and bumper were apparently replaced. I noticed there was a rebuilt sticker in the side of the driver door, from the WA license dept dated 5/10/2007. Owner claims he's the 2nd owner and has only had the car for a year.

Got home and ran CarFAX. Found out the car actually has a Dismantled Title on it in addition to the rebuilt title. Yes, I read that a dismantled title means the car cannot be rebuilt, yet this one clearly is.

Any ideas exactly what type of damage constitutes getting a Dismantled Title set on a car?