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# A:·I~DE / : CLIIIICI OI'FICI ,, 1MJ11181ECCIURI',rDnr1111W.W!fli'OII DATE 

## JUL f 

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# (~~ SupremeCourtCieri<



### IN THE SUPREME COURT OF THE STATE OF WASHINGTON

CERTIFICATION FROMTHE UNITED ) STATES COURTOFAPPEALS FORTHE ) NINTH CIRCUIT ) No. 91932-1 IN ) ) En Bane CENTURION PROPERTIES Ill, LLC; SMI ) GROUP XIV, LLC, ) 

## JUL. 142016 ) Filed Plaintiffs-Appellants, ) ) 

### v. ) ) CHICAGO TITLE INSURANCE ) COMPANY, a Nebraska company, ) ) Defendant-Appellee. ) )

WIGGINS, J,-TheUnited States CourtofAppealsforthe Ninth Circuitcertified the following question to this court: "Does atitle company owe a duty of care to third parties in the recording oflegal instruments?"We answerthe certified question noand hold that title companies do notowe a duty of care to third parties in the recording of legal instruments. Such a duty is contrary to Washington's policy and precedent, and other duty ofcare considerations.Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 FACTS This certified question arises from acivil action for money damagesfiled in the United States District Courtforthe Eastern DistrictofWashington. Plaintiffs Centurion Properties Ill LLC (CP Ill) and SMI Group XIV LLC (collectively Plaintiffs) assert that defendant ChicagoTitle Insurance Company negligently breached itsdutyofcare and caused damages when it recorded unauthorized liens on CP Ill's property. Michael Henry, the sole member of SMI, joined with Thomas Hazelrigg to form CP Ill. They formed CP Ill in order to purchase property and commercial buildings in Richland, Washington. They further agreed that 90 percent ofCP Ill would be owned by individuals and entities controlled by Hazelrigg and 10 percentwould be owned by SMI. Aaron Hazelrigg, through nonparty Centurion Management Ill LLC, was the managing memberofCP Ill. To purchase the property, CP Ill obtained a $70.8 million loan from General Electric Capital Corporation (GECC). The loan was secured by a deed oftrust on the property naming GECC as the beneficiary. The deed of trust and two other instruments-the CP Ill operating agreement and the GECC loan agreementprohibited the placement of any liens or encumbrances on the property without GECC's approval. Any unauthorized lien or encumbrance would constitute an event of default. Defendant Chicago Title served as escrow agent, closing agent, and title insurer for the purchase of the property at issue. Chicago Title recorded the GECC deed of trust and is named trustee for GECC's senior lien. Chicago Title, as trustee,

2Centurion Props. 1/1, LLC v. Chicago Title Ins. Co., No. 91932-1 also received and reviewed copies of the CP Ill operating agreement and the GECC loan agreement as part ofthe transaction. Following the sale, four liens were placed on the property without GECC's approval. The four unauthorized liens were recorded by Chicago Title: two separate deeds oftrustgranted by CP Ill in favor ofCentrum Financial Services Inc.; a deed of trust granted by CP Ill to Trident Investments Inc.; and a memorandum ofagreement between CP Ill and Trident. Two additional liens are not at issue in this case. Each of these liens was a facially valid instrument: the instruments bore the correct legal description, and they were all signed and notarized through Centurion Management by either Aaron Hazelrigg or Thomas Hazelrigg as director of CP Management on behalfofCP 111. 1 Chicago Title initially recorded Centrum Financial's deed of trust in conjunction with issuing a commitment for title insurance. The remaining three recordings were done as accommodations. Later, GECC obtained a title report and learned of the four (prohibited) liens that Chicago Title recorded. GECC notified CP Ill that thejunior liens were events of default and accelerated the entire unpaid balance ofthe loan, imposing a default rate of interest. Though CP Ill attempted to refinance the loan, no lenderwould refinance it while the prohibited liens remained on CP Ill's title. GECC moved forward with its foreclosure, forcing CP Ill to file for bankruptcy2

1 Plaintiffs allege that even though these liens were purportedly entered into by Centurion Management on behalf of CP Ill, they were not authorized liens. They further assert that Chicago Title was under a duty to look behind the instruments to determine whether the signatures were, in fact, valid. 2 During this time, Henry, as the sole member of SMI, took control of CP Ill from the Hazelriggs. He is now the sole owner ofboth companies. 3Centurion Props. Ill, LLC

### v. Chicago Title Ins. Co., No. 91932-1 Plaintiffs filed a civil action against the Hazelriggs, Centrum Financial, and others, alleging that the named defendants misappropriated funds from CP Ill, improperly transferred ownership of CP Ill, and secretly placed liens on CP Ill's property. These claims sought to (1) enjoin foreclosure ofthe allegedly unauthorized liens and (2) quiet title by voiding the instruments that created them. Plaintiffs later added a sole complaint against Chicago Title; this complaint asserted that Chicago Title was negligent in recording the prohibited liens and that the resulting defaults caused CP Ill to incur more than $7.5 million in damages, including $3 million in default interest. The claims against all other parties settled, leaving only the negligence claim against Chicago Title. The district court dismissed this claim on summary judgment, finding that Chicago Title did not owe Plaintiffs a duty of care. Centurion Props. Ill, LLC 

### v. Chi. Title Ins. Co., No. CV-12-5130-RMP, 2013 WL 3350836 (E.D. Wash. July 3, 2013) (court order). Plaintiffs appealed, and the Ninth Circuitcertified its question tothis court. Centurion Props. Ill, LLC v. Chi. Title Ins. Co., 793 

### F.3d 1087 (9th Cir. 2015). We accepted review pursuantto RCW 2.60.020. ANALYSIS We are asked whether a title insurance company owes a duty of care to third parties in the recording of legal instruments.Adutyofcare is '"an obligation, to which the lawwill give recognition and effect, to conform to a particular standard ofconduct toward another."' Affil. FM Ins. Co. v. LTK Consulting Servs., Inc., 170 Wn.2d 442, 449, 243 P.3d 521 (2010) (internal quotation marks omitted) (quoting Transamerica Title Ins. Co. v. Johnson, 103Wn.2d 409, 413, 693 P.2d 697 (1985). The dutyofcare question implicates three main issues-the existence ofa duty, the measure ofthat

4Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 duty, and the scope ofthat duty. 

### /d. (quoting DAN B. DOBBS, THE LAW OFTORTS§ 226, at 578 (2000)). "In a negligence action, in determining whether a duty is owed to the plaintiff, a court must notonlydecidewho owesthe duty, but also to whom the duty is owed, and what is the nature ofthe dutyowed." Kellerv. CityofSpokane, 146Wn.2d 237, 243, 44 P.3d 845 (2002). The existence ofa duty and the scope ofthat duty are questions oflaw, and both are determined by considering the factors listed below. We consider logic, common sense,justice, policy, and precedent, as applied to thefacts ofthe case, when determining whethera defendantowes a duty in tort. Affil. FM Ins. Co., 170 Wn.2d at 449. We have long applied these factors when defining "duty," and they can be traced backfor more than 100 years. 3We applythese factors here. Wefirstexamine precedentand analyzewhetherourdecisions orthe decisions of neighboring jurisdictions support finding a duty here. We next consider whether Washington's policy of protecting the rights of property owners through the title recording system is advanced or frustrated by imposing a legal duty ofcare. Finally,
we consider logic, common sense, and justice. These considerations lead us to concludethat atitle insurance companydoes notowe adutyofcare to third parties in the recording oflegal instruments. I. Standard ofreview Certified questions from a federal court are questions of law thatwe review de
novo. Grayv. Sutte/1

### & Assocs., 181 Wn.2d 329, 337, 334 P.3d 14(2014). We consider

3The original language from 1 ThomasAtkins Street, The Foundations ofLegalLiability100, 110 (1906) is quoted time and again from AffiliatedFMInsurance Co., 170 Wn.2d at 449, to Snyderv. Medical Service Corp. ofEastern Washington, 145Wn.2d 233, 243, 35 P.3d 1158 (2001), to Hartleyv. State, 103Wn.2d 768, 779, 698 P.2d 77 (1985), to King v. CityofSeattle, 84 Wn.2d 239, 250, 525 P.2d 228 (1974). 5Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 

### the legal issues not in the abstract but rather based on the certified record provided bythefederal court. 

### /d. (citing RCW2.60.030(2)). Our ruling is notadvisory-pursuant to RCW 2.60.020, our ruling in answerto the certified question resolves actual issues pending in the federal proceeding and will be legal precedent in all future controversies involving the same legal question. 

### /d.

II. Precedent We first consider precedent. Whetheratitle insurance company owes aduty of
care to third parties in the recording of legal instruments is a question of first impression forthis court. However, our precedent firmly supports the conclusion that the answerto this certified question is no. Our analysis begins by considering the duties owed by title insurance companies in prior cases. We next consider other circumstances that have led us to recognize a professional duty of care. Washington law treats professional duties as discrete duties owed to clients-absent a special relationship, we have extended a professional duty of care to third parties only (1) when the third party is an intended beneficiary, (2) when the third party justifiably relied on a professional's representations under a theory of negligent misrepresentation, or (3) when a professional is best able to mitigate the risk of a physical injury. See, e.g., Stewart Title Guar. 

### Co. v. Sterling Sav. Bank, 

### 178Wn.2d 561, 567, 311 P.3d 1(2013) (no duty to nonclient absent intent to benefit nonclient); ESCA Corp. v. KPMG Peat Marwick, 

### 135Wn.2d 820, 832, 959 P.2d 651 (1998) (negligent misrepresentation); Affil. FMIns. 

### Co., 170 Wn.2d at 545 (engineer owed a duty of care to third parties who may be harmed by engineer's negligence). Because Plaintiffs do not assert a theory of

6Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 negligent misrepresentation, our analysis considers our rule limiting duties to third parties who are intended beneficiaries and the rationale extending a duty to professionals able to mitigate the risk of physical injury. We conclude by considering the approaches ofArizona and California, the only other states to consider the duty owed by atitle insurance company to athird partywhen recording legal instruments. 

### A. Title insurance companies do notowe a generaldutyto clients to search for anddisclose potentialtitle defects when issuingpreliminarycommitments Title insurance companies may perform several services for their own benefit
or for their client's benefit. Consistent with chapter 48.29 RCW ("Title Insurers"), our analysis of the duty owed by title insurance companies to their clients follows the nature ofthe service at issue. Though we have notconsidered the duty owed by atitle insurance companyto nonclientthird parties, we thoroughly analyzed and explored the duty of atitle insurer to its clients-namely to its insureds-in Barstad v. Stewart Title Guaranty Co., 145 Wn.2d 528, 541, 39 P.3d 984 (2002). We specifically considered a title insurance company's dutyto search for and/orto disclose title defects to its clients when issuing
a preliminary commitment. We held that title insurance companies do not owe their clients a duty to search for and/or to disclose title defects when preparing a "preliminarytitle commitment" pursuantto the plain languageof RCW48.29.010(3)(c). 

### /d. at 530. To reach this conclusion, we considered the meaning of chapter 48.29 RCW, the legislative purpose ofthat statutoryscheme, and standard industry practice, and we conducted a comparative analysis of other states in the Ninth Circuit. 

### /d. at 535-42.

7Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 Barstad

### considered the general duties imposed on title insurance companies by chapter48.29 RCW. 

### /d. at 535. There, the insureds asserted thattitle insurers owe a duty of care when preparing abstracts of title and argued that a preliminary title commitment serves the same purpose as an abstract oftitle, giving rise to the same duty ofcare. 

### /d. We rejected this argument. 

### /d. We began by examining the definitions of the services performed-and resultant duties owed-bytitle insurers. 

### /d. We observed that an abstract oftitle is "a written representation, provided pursuantto contract, whetherwritten or oral, intended to be relied upon bythe person who has contracted for the receipt of such representation, listing all recorded conveyances, instruments, or documents which, under the laws of the state of Washington, impart constructive notice with respect to the chain oftitle to the real property described. An abstract of title is not a title policy as defined in this subsection." 

### /d. at 535 n.8 (quoting former RCW 48.29.010(3)(b) (1997)4). 

### Due to the contractual and reliance principles associated with an abstract, we noted that we have long recognized the potential duties associated with an abstract oftitle. 

### /d. at 539 n.14. We contrasted this service with the statutory definition of a "preliminary commitment" at RCW 48.29.010(3)(c): '"Preliminary report,' 'commitment,' or 'binder' means reports furnished in connection with an applicationfortitle insurance and areoffersto issue atitle policysubjecttothe stated exceptions inthe reports, the conditions and stipulations of the report and the issued policy, and such other matters as may be incorporated by reference. The reports are not abstracts of title, nor are any of the rights, duties, or responsibilities applicable to the preparation and issuance of an abstract of title applicable to the issuance of any report. Any such report shall not be construed as, nor constitute, a representation as to the condition ofthe title to real property, but shall constitute a statement of terms and

4 Minorwording changes were made in 2005 but do not alterthe meaning. LAWS OF 2005, ch. 223, § 14. 8Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 conditions upon which the issuer is willing to issue its title policy, ifsuch offer is accepted." 

### /d. at535 n.8 (quoting former RCW 48.29.010(3)(c)5).Weobserved thata preliminary commitment is "merely an offer to issue the title insurance subject to the stated conditions." 

### /d. at 536 (citing former RCW 48.29.010(3)(c)). This research is performed specificallyfor thetitle insurance company's benefitand notforthe benefit ofthe insured. /d. at 540. We also considered industry practice, legislative intent, and the approach of otherjurisdictions, as well as the insured's argument that title insurance companies
owe a fiduciary duty to disclose title defects. 

### /d. at 542-44. Every one of these considerations led to the conclusion that title insurance companies have no general duty to disclose potential or known title defects when they are not preparing an abstract oftitle because these services are not prepared for or intended to be relied
on by a person otherthan the insurer. 

### /d. at 530. Our holding in Barstadfollows a long line ofcases in which we have rejected attempts to impose adutyon title insurance companiesto searchfor and disclosetitle defects. See, e.g., Transamerica Title Ins. Co. 

### v. Johnson, 103 Wn.2d 409, 413-14, 693 P.2d 697 (1985) (no reliance by third party on title insurer's preliminary commitment); Klickman v. Title Guar. Co. ofLewis County, 105 Wn.2d 526, 528, 716 P.2d 840 (1986) (no liability because notitle defect); Lombardo

### v. Pierson, 121 Wn.2d

5 Minor wording changes were made in 2005, including the following changes to the final sentence ofsubsection (3)(c): "Any suchThe report shall not be construed as, norconstitute, is not a representation as to the condition ofthe title to real property, but shall constitute is a statement of terms and conditions upon which the issuer is willing to issue a its title policy, if stiGA the offer is accepted." LAWS OF 2005, ch. 223, 

### § 14. The changes do not affect our analysis. 9Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 577, 581-83, 852 P.2d 308 (1993) (same). These cases strongly suggest that title insurers do not owe a duty of care to third parties when merely recording legal instruments. Title companies may record documents with the county recorder's office in conjunction with the issuance of a title commitment or policy, or as a separate accommodation recording at the request of the customer. Here, Chicago Title recorded Centrum Financial's deed oftrust in conjunction with issuing a commitment for title insurance and later completed three such accommodation recordings. No party requested an abstract of title, and none of these recordings was done at the request of Plaintiffs. ChicagoTitle did not have aduty to identify or disclose title defects to its client, Centrum Financial, in preparing acommitmentfortitle insurance; such aduty is owed only in preparing an abstract oftitle. AccordBarstad, 145Wn.2d at 536; former RCW 48.29.010(3)(b), (3)(c). Further, Washington's title insurance and recording statutes do not impose liability for the negligent recording of titles. See generally ch. 48.29 RCW; ch. 65.08 RCW. Because our title insurer liability precedent does not support finding adutyto identify and disclose title defects to its own clients, it cannot support extending this dutyofcareto nonclientthird partieswhen recording a legal instrument, particularly when that legal instrument is facially valid, as it is here.6

6 Plaintiffs cite Hu Hyun Kim v. Lee for the proposition that title companies owe a duty of reasonable carewhen fulfilling professionalwhen fulfilling professional obligations and giving professional advice to their clients. 145 Wn.2d 79, 91, 31 P.3d 665 (2001) (title company negligent in rendering an expert opinion when it failed to discover and disclose an existing, recorded, and perfected lien on the client's property). We are unpersuaded by Kim on these facts in view ofour decision two years later in Barstad, 145 Wn.2d 528, where we held that title insurance companies do not have a duty of care when preparing commitment reports 10Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 B. Ourothertitle insurance companycases do notinform ouranalysis ofthis issue Plaintiffs' citations to other cases holding that title insurance companies owe duties in tort are notwell taken. Plaintiffs cite Denaxas 

## v. Sandstone Court ofBellevue, LLC, 148 Wn.2d 654, 663, 63 P.3d 125 (2003)forthe proposition that title insurance companies have a duty to exercise reasonable care in carrying out their instructions. However, Denaxas actually held that "the Title Company did not have a dutyto point outthe discrepancy between the legal description in the Agreement and that in the closing documents." /d. To the extent Denaxas discussed a duty to follow instructions, we held that an "'escrow agent's duties and limitations are defined

. . . by his instructions."' 

### /d. (alteration in original) (quoting Nat'/BankofWash. v. EquityInvestors, 81 Wn.2d 886, 910, 506 P.2d 20 (1973)). This point arises strictly out ofthe specific characteristics governing escrow holders-characteristics that are undisputedly not at issue in this
case as Chicago Title did not perform any escrow services. See Nat'/BankofWash., 81 Wn.2d at 910. Plaintiffs also rely on Walker

## v. Transamerica Title Insurance Co., 65 Wn. App. 399, 828 P.2d 621 (1992). But Walkeraddresses only proximate cause; the court did not address duty because Transamerica Title conceded duty for the purpose of its summary judgment motion. /d. at 402. Further, Walker involved the recording of a

under RCW 48.29.010. Kim addresses neither chapter 48.29 RCW nor liability in regard to commitments. Furthermore, there being no contract here between Chicago Title and CP Ill, Kim cannot inform our analysis ofthe certified question before us. 11Centurion Props. Ill, LLC

### v. Chicago Title Ins. Co., No. 91932-1 facially invalid lien thatdid notcontain adescription ofthe propertyatissue.

### /d. at401. Walkerdoes not inform ourduty analysis. 

### C. Absenta substantialrisk topublic safetyorpropertydamage, professionals do notowe a dutyto thirdparties when the transaction atissue is notintended to benefitthe thirdparty The duty of a title insurance company to third parties is a question of first impression to this court. Therefore, we turn to analogous considerations of a professional's dutyto third-party nonclients for guidance. Using a modified version of California's multifactortest,? we recently considered whether attorneys owe nonclient third parties a duty of care in Sterling Savings Bank, 178 Wn.2d 561. Because our multifactortest is derived from the California test applied in Seeley v. Seymour, 190 Cal. App. 3d 844, 237 Cal. Rptr. 282 (1987) (see infra Section II

### .D) and because the issue of a lawyer's duty to a nonclient is similar to the duty of a title insurer to a nonclient, our analysis in Sterling is instructive to our analysis here. In Sterling, we applied a multifactor test designed to determine when an attorney rnay be liable for malpractice to a nonclientthird party. These factors are: "1. The extent to which the transaction was intended to benefit the plaintiff [that is, the third party suing the attorney]; "2. The foreseeability ofharm to the plaintiff; "3. The degree ofcertaintythatthe plaintiffsuffered injury; "4. The closeness of the connection between the defendant's

. conduct and the injury;

7Wefirstadoptedthe multifactortestin Trask

### v. Butler, 123Wn.2d 835, 872 P.2d 1080 (1993). In Trask, we considered California's multifactor test and the Illinois "third party beneficiary'' test in deciding whether an attorney owes aduty to a nonclient. /d. at 840. After discussing both tests, the court combined the two and created Washington's modified multifactor test. /d. at 841-43. 12Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 "5. The policy of preventing future harm; and "6. The extent to which the profession would be unduly burdened by afinding of liability." 178 Wn.2d at 565-66 (first alteration in original) (quoting 

### Trask v. Butler, 123 Wn.2d 835, 843, 872 P.2d 1080 (1994)). Quoting 

### Trask, we explained that the first factor is the '"primary inquiry"' in determining liability to third parties. 

### /d. (quoting 

### Trask, 123 Wn.2d at 842). We further explained that "'under the modified multifactor balancing test, the threshold question is whether the plaintiff is an intended beneficiary of the transaction to which the advice pertained'" and held that "'no further inquiry need be made unless such an intent exists."' 

### /d. (quoting 

### Trask, 123Wn.2d at 843). Ultimately,
we found no duty because the transaction at issue was not intended to benefit the third party. 

### /d. at 570. Thesefactors do not supportfinding a duty in this case. Neither ChicagoTitle's preliminary commitmentand recording norits subsequentaccommodation recordings forthe benefit of its client, Centrum Financial, were intended to benefit CP 

### Ill. Indeed, the opposite is true-any recording of Centrum Financial's interest in the property would burden CP 

### Ill. Underthe multifactortest, this threshold inquiry is dispositive of Plaintiffs' claim. Plaintiffs do not argue that the transaction between Centrum Financial and ChicagoTitlewas intended to benefitthem. Instead, theyseem to asserttwo separate arguments in support of liability. First, they argue that Chicago Title assumed a duty ofcare arising out ofthe foreseeability ofthe injuryto CP Ill when it agreed to issue a commitment to Centrum Financial and to record its instruments. Second, they assert

13Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 that Washington law recognizes tort duties by title insurance companies. Our precedent requires rejection of both arguments. Plaintiffs'first argumentisthatliabilityto CP Ill arises outofCentrum Financial's instruction to Chicago Title. From this instruction, Plaintiffs argue that Chicago Title owed them a duty ofcare "given the obvious and known risks to the landowner." Pis.' Reply Br. at 7. This assertion assumes that a duty to CP 

### Ill could be inferred from the contractual agreement between Centrum Financial and Chicago Title, an argument
we reject. See infra Section IV.a. This argumentfor a duty also appearsto be entirely predicated on the foreseeability ofthe harm. However, foreseeability of harm is only
one ofsix factors necessary to determine whether a duty exists. Sterling, 178Wn.2d at 566. Further, we do not consider the foreseeability of harm when a transaction is not intended to benefit the third-party plaintiff. 

### /d. Thus, foreseeability of harm, alone, is insufficientto support imposing aduty. Plaintiffs also assertthattitle insurance companies are professional institutions charged with the public trust; therefore, they owe a duty of reasonable care to third parties in the exercise of their professional responsibilities. Recognizing that title insurance companies may owe a duty of reasonable care to their clients in certain scenarios not before us today, we hold that the duty considerations do not support extending the duties owed bytitle insurance companiesto encompass liability to third parties in the recording of legal instruments. Plaintiffs rely heavily on a recent decision establishing a professional duty of
care toward third parties under atheory ofgeneral negligence. SeeAffil. FM Ins. Co., 170Wn.2d at453-54. Plaintiffs read AffiliatedFMInsurance Co. too broadly: the policy

14Centurion Props. Ill, LLC v. Chicago Title Ins. 

### Co., No. 91932-1 considerations, precedent, logic, justice, and common sense underlying that decision
are not present here. In Affiliated FM Insurance Co., we considered a certified question from the Ninth Circuit. The question asked whether a party who has a contractual right to operate commercially and extensively on property owned by a nonparty may sue an engineering consulting firm in tortfor damage to that property when the party and the engineers are not in privityofcontract. 

### /d. at

### 447.The dispute arosefrom afire aboard
atrain on Seattle's monorail system. 

### /d. at

### 445. Though the city ofSeattle owned the property that was physically damaged by the fire, Seattle Monorail Service operated the monorail and suffered significant economic damages as a result of the fire. 

### /d. Seattle Monorail Services arguedthatthe fire wasthe resultofan engineer's negligent design and sued, arguing that the engineers were under a duty to Seattle Monorail Servicesto exercise reasonable care, despitethe lackofcontractual privity. 

### /d. at

### 446. We found that a duty existed. 

### /d. at 

### 453-54. In doing so, we balanced the risk tothe physical safetyofpersonsand property arising out ofan engineer'swork against the usefulness of private ordering (e.g., preference for contractual remedies) and against the economic burden a duty would place on engineers. See id. at 

### 451-54. These policy considerations supported the court's analysis that a duty exists where "the interest in safety is significant" and the engineers occupy a position of control such that their training, education, and experience place them in the best position to prevent harms caused by their work. 

### /d. at

### 453. We also considered precedent, both here and nationally, finding that the "engineers' common law duty of care has long been acknowledged in Washington. 

### /d. at

### 454. 15Centurion Props. Ill, LLC

### v. Chicago Title Ins. Co., No. 91932-1 These considerations do not weigh in favor of a duty here. There is no significant interest in public safety at issue and no concerns for physical safety. We therefore reject Plaintiffs' attempts to borrow our professional duty analysis from inapposite contexts. D. Other jurisdictions do notprovidepersuasive authorityon this issue As the Ninth Circuit recognized in its certification order, only two cases have considered whethertitle insurance companies owe a duty ofcare to third parties: the Arizona Court ofAppeals in Luce v. State Title Agency, Inc., 190Ariz. 500, 950 P.2d 159 (1997) andthe California CourtofAppeals in Seeley, 190 Cal. App. 3d 844 (1987). These decisions reach opposite conclusions, in part becausethe decisions are based
on different legal theories and different facts. Due to the difference in legal theories and facts, these cases provide limited persuasive reasoning for our consideration in this case. On facts nearly identical to this case, theArizona Court ofAppeals considered whether a title agency owed a professional duty ofcare to protect a third party from foreseeable harm when it gratuitously recorded a deed oftrust on behalfofa lender. See Luce, 190 Ariz. at 502. In Luce, a general partner signed a deed of trust to a lenderwithoutthe approval ofhis limited partners, despitethefactthatthe partnership agreement required him to have their approval. 

### /d. at 501. The lender asked State TitleAgency to insure the policy and to record the deed oftrust. 

### /d. State Title issued
a preliminary title report, provided a lender's policy oftitle insurance, and gratuitously recordedthedeed. 

### /d. StateTitle acknowledgedthat it read the partnership agreement

16Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 duringthis process, and the court inferred that StateTitle had actual knowledge ofthe agreement's limitations on the general partner's authority. 

### !d. The limited partners sued, asserting thatStateTitle owed aduty based on either its review ofthe partnership agreementorits gratuitous recording ofthe deed oftrust. 

### !d. at 501-02. The trial court granted summary judgment in favor of State Title, 

### id. at 501, and the Court ofAppeals affirmed. 

### !d. at 504. The Court ofAppeals first held that therewas no professional dutyarising out ofthe foreseeable harm because StateTitle had no contractual relationship with anyone, no special relationship (or indeed, any relationship at all)with the injured plaintiff, and no abilityto control the behavior ofthe general partner. 

### !d. at 502-03.s The facts presented to the Arizona Court ofAppeals are virtually identical to those in the case before us and reinforce our conclusion here. Further, as discussed supra Section ll.c of this opinion, Washington recognizes that foreseeability of harm is one of six factors the court considers in deciding whether a duty is owed to a nonclient. Though Arizona applied a different legal analysis and did not explicitly considerthe intentto benefit, the application ofthe "intentto benefit"factorwould have resulted in the same conclusion. Their conclusion that no duty exists on analogous facts supports our decision here. In Seeley, the California Court ofAppeals reached the opposite conclusion on significantly different facts. See 190 Cal. App. 3d 844. In Seeley, a buyer attempted

8TheArizona CourtofAppeals also considered whetherStateTitle owed adutyofcare under Restatement (Second) ofTorts 

### § 324A (Am. Law lnst. 1965) and concluded that the section was inapplicable. 17Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1
to buy property owned by Seeley. 

### /d. at 850. Seeley was not interested in selling but indicated that he would consider a long term lease of the property. 

### /d. at 851. The parties negotiated the terms ofthe lease at length but did not come to an agreement. 

### /d. Following further negotiations, the buyer unilaterally prepared a "'Memorandum ofAgreement"'that setforth theterms ofa60-year lease between himselfand Seeley. 

### /d. The buyer signed the agreement and had his signature notarized; he never presented the agreement to Seeley. 

### /d. Instead, the buyer took the agreement to a title insurance company. 

### /d. The buyer was a regular customer ofthe title insurance company, which agreed to file the unsigned agreement for recording. 

### /d. The title insurance company filed the agreement in a stack of documents insured by their company, and the recorder recorded the invalid, unsigned encumbrance on Seeley's property. 

### /d. Seeley knew nothing ofthis agreement. 

### /d. The encumbrance affected Seeley's ability to sell his title. 

### /d. at 852. He then sued the county recording office for negligent recording; he later amended his complaint and sued the title insurance companyfor negligence. 

### /d. The California Court ofAppeals considered whetheratitle insurance company, not acting as escrow, may be held liable "for the negligent recordation of a nonrecordable document."

### /d. at 860. In holdingthatthetitle company herewas liable, the court considered six factors: "(1)the extenttowhichthe transactionwas intendedto affectthe plaintiff; (2) the foreseeability of harm to the plaintiff; (3) the degree of certainty that the plaintiff suffered injury; (4) the closeness of the connection between the defendant's conduct and the injury suffered; (5) the moral

18Centurion Props. Ill, LLC

### v. Chicago Title Ins. Co., No. 91932-1 blame attached to the defendant's conduct; and (6) the policy of preventing future harm." !d. at 861 (quoting Earp v. Nobmann, 122 Cal. App. 3d 270, 290, 175 Cal. Rptr. 767 (1981)). As discussed earlier, these factors are comparable to Washington's multifactortest in Sterlingand supportouradoption ofthattest here. Compare Seeley, 190 Cal. App. 3d at 861, with Sterling, 178Wn.2d at 566. But there are critical differences between Seeley and this case that limit its persuasive value here. Seeleyfirst considered whetherthe transaction was intended to affect a third-party plaintiff. 190 Cal. App.3d at 861. The transaction was intended to undermine Seeley's interest in the property. !d. at 861. Conversely, the recordation in the instant case was intended to secure Centrum Financial's procured lien; there
was no intentto benefit or harm CP 

### 111.9 Further, the instrument at issue in Seeleywas facially invalid. 10 Thus-unlike
our case-the title insurance company in Seeley did not have to review any other documents to knowthatthe documentwas not recordable. Thetitle insurer in Seeley also submitted the facially invalid instrumentto a special "'stopped clock"' station. 

### /d. at861 n.7. Thecounty recorderautomatically recorded all instrumentsdropped atthat station pursuant to a contract with the title insurer that required the title insurer to review all documentsfor recording compliance priorto filing; thetitle insurerin Seeley violated its contractwith the recording office by submitting the invalid instrumentwith other, compliant instruments atthis station. 

### /d.

9 In Washington, thefactorto be considered is whetherthetransaction was intendedto benefit the third party. Sterling, 178 Wn.2d at 566 (emphasis added). 10 TheArizona Court ofAppeals also distinguished the case on this ground. Luce, 190 Ariz. at 503 (citing Seeley, 190 Cal. App. 3d at 861). 19Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 These facts played a significant role in the Seeleycourt's evaluation offactors two, four, five, and six. 

### /d. at 861. The court held that these facts made the harm foreseeable and thatthetitle insurance company's actions gavethe invalid instrument
a presumption ofvalidity-establishing both a close connection between the act and the harm, and rendering the title insurer's conduct worthy of moral blame. 

### /d. at 861- 

### 62. The title insurance company's violation of the recording statutes as well as its contractwith the county recording office also presented a dangertotitle stability in the future, satisfying California's sixth factor. 

### /d. at 

### 862. These considerations are not present here, where a title insurer presented facially valid instruments to a county recording office. We discuss the arguments against burdening title insurance companies to look behind facially valid instruments before recording throughout this memorandum; in sum, placing this burden on title insurance companies frustrates Washington's strong public policy of protecting property owners through the recording process. These factual differences are substantial; Seeley's facts and conclusions are inappositen In sum, our precedent supports our conclusion that title insurance companies have a duty ofcare in only limited situations outside ofa contractual relationship and
no duty to third parties in the recording of legal instruments. Plaintiff's argument that
a duty is created merely because the harm is foreseeable is inconsistent with our

11 We recognize the slight variations between the Seeleyfactors and the Sterling factors. Compare Seeley, 190 Cal. App.3d at 861, with Sterling, 178 Wn.2d at 566. Due to the significant factual differences, we do not address the differences in the factors. We also note that the Seeleycourt expressly denied that it was recognizing a "tort of 'negligent slander of title"' orthat liability arose "solely from the recordation ofthe document." 190 Cal. App. 3d at 862 n.8. 20Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 jurisprudence; their remaining citations to our case law and to other jurisdictional approaches are not instructive to our analysis. Our review of our precedent suggests thatthe answerto the certified question is no.

Ill. Public policy does not support extending a duty on title companies recording legal instrumentsto search for and disclose potential title defects We next consider public policy. "The concept ofduty is a reflection ofall those considerations ofpublicpolicywhich leadthe lawto concludethata'plaintiff's interests
are entitled to legal protection."' Taylorv. Stevens County, 111 Wn.2d 159, 168, 759 P.2d 447 (1988) (quoting W. PAGE KEETON, ETAL., PROSSERAND KEETON ON THE LAW OFTORTS 

### § 53, at 357 (5th ed. 1984)). We balance the interests atstake to determine whether a title insurance company owes a duty to search for and disclose potential title defects when recording legal instruments. AccordAffil. FMIns. Co., 170Wn.2d at 450. Plaintiffs encourage us to find a duty, arguing that the Washington state courts and legislature have long recognized the important public policy of protecting the rights of property owners. We agree that this is an important policy ofthis State, but Plaintiffs are incorrect to suggest that extending a duty of care to title insurance companies would further this public policy. Washington has a comprehensive title insurance scheme, see generally ch. 48.29 RCW, and extensive recording requirements, see generallych. 65.08 RCW. The purpose ofthe recording acts is to
ensure stability and certainty oftitle to real property. See Ellingsen v. Franklin County, 117Wn.2d 24, 28-29, 810 P.2d 910 (1991). These recording requirementsfurtherthis purpose by holding recorded interests superior to unrecorded interests. See RCW

21Centurion Props. Ill, LLC

### v. Chicago Title Ins. Co., No. 91932-1 65.08.070. Thus, these statutory schemes further Washington's policy of protecting property rights by encouraging parties to record their interests. We evaluate whether finding a duty of care from title insurance companies to third parties in the recording of legal instruments fulfills or frustrates these public policies. Washington's statutory schemes do not contemplate liability to third parties forthe negligent recording oftitles. See generallych. 65.08 RCW. In lieu ofastatutory remedy, Washington protects the valid interests of property owners from improper recording through the torts ofslanderoftitleandtortious interferencewith a contract. 12 Rorvig v. Douglas, 123 Wn.2d 854, 873 P.2d 492 (1994) (slander oftitle); Calbom 

## v. Knudtzon, 65 Wn.2d 157, 396 P.2d 148 (1964) (tortious interference). These torts, discussed below, are notwithin the scope ofthis opinion. 13 "Slanderoftitle is defined as: (1) false words; (2) maliciously published; (3) with reference to some pending sale or purchase of property; (4) which go to defeat plaintiff's title; and (5) result in plaintiff's pecuniary loss." Rorvig, 123 Wn.2d at 859. Tortious interference with a contract requires (1) the existence of a valid contractual relationship or business expectancy, (2) knowledge ofthe relationship or expectancy
on the part ofthe interferer, (3) intentional interference inducing or causing a breach
ortermination ofthe relationship orexpectancy, and (4) resultant damageto the party whose relationship or expectancy has been disrupted. Ca/bom, 65 Wn.2d at 162-63.

12 Washington residents may also secure their property rights through equitable actions to quiettitle. See, e.g., Kobza 

### v. Tripp, 105Wn. App. 90, 93, 18 P.3d 621 (2001). 13 CP Ill does not argue that its proposed duty arises out of a special relationship, such as a fiduciary duty, between itself and Chicago Title. Nor do they argue that Chicago Title acted maliciously or in bad faith. Plaintiffs assert only that Chicago Title owes them a duty under general negligence principles. In rejecting Plaintiffs' argument, ourdecision does not suggest that title insurance companies are not liable for their intentional torts. 22Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 Neither of these torts is satisfied by simple negligence. Tortious interference with a contract requires intentional conduct, and slander of title requires malicious conduct. The reason for this rule is clear: if simple negligence were the rule, a party claiming an erroneous but good faith interest in real property would not be entitled to litigate his claim and havean adjudicationwithoutfearofbeing penalized in damages. See, e.g., Ward

## v. Mid-West

### & GulfCo., 1923 OK 972, 97 Okla. 252, 223 

### P. 170; see a/so RESTATEMENT (SECOND) OF TORTS 

### § 773 (AM. LAW INST. 1979) (recognizing privilege to assert claim in good faith). These heightened requirements further the policy of protecting the rights of property owners by encouraging property owners to assert valid property rights while protecting property owners from unlawful claims. Thus, we agreewith ChicagoTitlethat recognizing liabilityforthe "negligent recording" ofa facially valid instrument would have a chilling effect on recording documents and undermine the goals of RCW 65.08.070. Policy supports our answer of no; to hold otherwisewould frustrateWashington's policy ofprotecting property rights through the title recording process.

IV. Considerations ofcommon sense, logic, and justice provide further support Our conclusion that title insurance companies do not owe third parties a duty ofcare when recording legal instruments is consistentwith Washington's policies and precedent. The remaining considerations of common sense, logic, and justice only reinforce this conclusion. A. Logic andcommon sense weigh againstfinding a dutyofcare Logic and common sense require us to reject Plaintiffs' argumentthat Chicago Title's duty of care to CP Ill arises out of Centrum Financial's instruction to Chicago

23Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 Title directing it to record the leasehold deed of trust only if they are committed to providing title insurance. That instruction reads in full: You may record the Leasehold [deed of trust]. provided you are irrevocably committed to insure the enclosed Mortgage, on a mortgagee's extended basis with coverage of$10,000,000.00, as avalid SECOND lien against the leasehold propertywhich is the subject ofthe commitment for title insurance issued under the referenced file number, subject only to the matters setforth therein. 2Appellant's Excerpts of 

### R. at 58. This instruction plainly directs ChicagoTitle to issue an insurance policy on the mortgage and to record if it is committed to issue that insurance policy. Chicago Title did so: it issued a commitment, insured the lien as valid, and recorded it. Under Barstad, Chicago Title did not owe a duty to Centrum Financial (its actual client) in issuing the title commitment because the commitmentwas for Chicago Title's benefit. 145 Wn.2d at 541. Ifthe lien was not valid, Centrum Financial may have had a claim under its insurance policy. But it is impossible to understand how this action and agreement between Centrum Financial and Chicago Title created a duty to CP Ill when CP Ill could not possibly have relied on the commitment orthe insurance policy. See ESCA Corp., 135 Wn.2d at 832 (accountant did not owe a duty ofcare to bank absentjustifiable reliance on accountant's draft report in making loan). As a matter of logic and common sense, CP Ill is not entitled to something for not11ing; not having entered into a contract with Chicago Title relating to future recordings, CP Ill is not entitled to the benefit of Centrum Financial's bargain with ChicagoTitle. Norarethey entitledto have ChicagoTitle reviewoperating agreements and presumably lengthy loan agreementswithout acontractfor-and paying for-that



### 24Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1 benefit. These factors reinforce our conclusion that title insurance companies do not
owe third parties a duty ofcare when recording legal instruments. B. Justice does notsupportfinding 

### a dutyto search foranddisclose potential title defects to third-partynonclients Finally, considerations ofjustice do not support finding a duty of care for the recording ofthese legal instruments. This factor supports placing liability on the party best able to mitigate orcontrol the anticipated harm. Cf. Affil. FM Ins. Co., 170Wn.2d at 453-54 (responsibility on party best able to mitigate the risks; balancing engineer's ability to design a project safely against an "innocent party who never had the opportunity to negotiate the risk of harm"); see also Zabka v. Bankof Am. Corp., 131 Wn. App. 167, 173, 127 P.3d 722 (2005) (bank owed no duty ofcare to plaintiffs who could have easily taken stepsto avoid fraud by bank's customer). Here, the manager of CP Ill had signed the documents filed by Chicago Title. When facially valid instruments are at issue, justice supports placing liability on the parties to those instruments. Plaintiffs urge us to hold thatjustice requires title insurance companies to look behind the signatures on the document and police the parties' agreements against conflicting corporate documents or loan agreements. This is not a just result, and placing this burden on title insurance companies increases their costs, slows the recording process, and frustrates public policy, with no appreciable benefit. Here, the existence of the invalid liens was the result of an (arguably invalid) agreement between CP Ill and Centrum Financial. These liens, which were signed and notarized by CP Ill's manager, placed CP Ill in default and caused damages. These actions

25Centurion Props. Ill, LLC

### v. Chicago Title Ins. Co., No. 91932-1 placed CP Ill in default regardless ofany action taken by ChicagoTitle. We declineto impose these damages on Chicago Title. 14 After considering each of the duty factors, we hold that title insurance companies do not owe third parties a duty of care when recording legal instruments. CONCLUSION In light ofthe foregoing, we answerthe certified question as follows: Question: Does atitle company owe a duty ofcare to third parties in the recording of legal instruments? Answer: No.

14 Plaintiffs' argument that Chicago Title "knew" it was recording invalid liens is unavailing. Chicago Title conceded, for the purposes of its summaryjudgment motion arguing that it did not owe Plaintiffs a duty, that it could be charged with knowledge of the GECC loan agreement's prohibition on secondary liens because it had access to that information but did not check it. Washington recognizes that both actual and constructive notice provides a party with knowledge of another person's real property interest. E.g., Miebach 

### v. Colasurdo, 102 Wn.2d 170, 175-76, 685 P.2d 1074 (1984). Requiring title insurancecompaniesto look behind every facially valid instrument because they have documents in their possession that may undermine that instrument frustrates public policy, increases costs, and asks title insurance companies to police legal instruments entered into by the independent parties. 26Centurion Props. Ill, LLC v. Chicago Title Ins. Co., No. 91932-1

WE CONCUR.

27