793 F.3d 1087
9th Cir.2015Background
- CPIII and SMI sue Chicago Title over recording of unauthorized junior liens on CPIII’s Richland property.
- George GECC loan required CPIII to obtain GECC’s approval before encumbering the property further; CPIII violated this by recording a junior lien.
- Chicago Title acted as escrow/closing agent and title insurer on the CPIII purchase and trustee on GECC’s senior lien, and recorded the junior lien.
- Centrum Financial Services provided recording instructions and a separate copy of prohibitive documents; Chicago Title issued the policy and recorded the lien, later recording additional instruments as a courtesy for Centrum.
- GECC learned of the liens in 2009; CPIII later declared bankruptcy and sought replacement financing, which failed; district court granted Chicago Title summary judgment on negligence claim, prompting appeal.
- The Ninth Circuit certified to the Washington Supreme Court the question whether a title company owes a duty of care to third parties in recording legal instruments, signaling that the answer is outcome-determinative and unsettled under Washington law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do title companies owe a duty of care to third parties when recording instruments? | CPIII contends title companies owe duty due to public-trust and foreseeability. | Chicago Title argues no duty under prevailing Washington precedent. | Certification appropriate; duty outcome not decided by panel. |
| Is Washington law clear on the existence of such a duty in this context? | Washington precedent is unclear; analogies to engineers/accountants support a duty. | Barstad/Klickman suggest no duty beyond contractual obligations. | Unclear; court certifies question to WA Supreme Court. |
| Should the case be decided in federal court while awaiting WA Supreme Court’s answer? | Uncertain duty may affect liability and causation; remand may be appropriate. | Certainty about duty is prerequisite to resolving causation; dismissal/affirmance possible depending on duty. | Proceedings stayed pending WA Supreme Court’s acceptance/answer to certified question. |
Key Cases Cited
- Affiliated FM Insurance Co. v. LTK Consulting Services, Inc., 243 P.3d 521 (Wash. 2010) (engineers owe duty to prevent foreseeable harm)
- Barstad v. Stewart Title Guar. Co., 39 P.3d 984 (Wash. 2002) (title companies and preliminary commitments; cautious stance on duties)
- Klickman v. Title Guar. Co. of Lewis Cnty., 716 P.2d 840 (Wash. 1986) (limits on title company duties beyond contractual terms)
- Seeley v. Seymour, 237 Cal. Rptr. 282 (Cal. Ct. App. 1987) (California recognizes duty to third parties for negligent recording)
- Luce v. State Title Agency, Inc., 950 P.2d 159 (Ariz. Ct. App. 1997) (Arizona reaches opposite conclusion on title-company duty)