Cummings v. Stephens , 157 Idaho 348 ( 2014 )

J. JONES, Justice,

concurring in part and dissenting in part.

I concur in the Court’s opinion, except for the award of attorney fees and costs against Cummings in favor of Northern Title. The escrow agreement between Cummings and Northern Title appears to exclude such an award. The escrow agreement provides in pertinent part:

If an action is brought involving this escrow and/or Escrow Agent, the parties agree to indemnify and hold the Escrow Agent harmless against liabilities, damages and costs incurred by Escrow Agent (including reasonable attorney’s fees and costs) except to the extent that such liabilities, damages and costs were caused by the gross negligence or willful misconduct of Escrow Agent.

This provision allows Northern Title to recover its attorney fees and costs in an action brought by one of the other parties, except in the instance where the attorney fees and costs were caused by Northern Title’s gross negligence or willful misconduct. In such instance, it appears that Northern Title effectively waives a claim for attorney fees and costs. That is precisely the situation here.

During 25 years of private practice in Jerome and Boise, I dealt extensively with title companies, but I can’t recall a situation where an escrow and title policy customer was as poorly served. Cummings should have been able to recover damages against Northern Title but, unfortunately, did not pursue the appropriate course toward that end. It appears that Cummings’ indecision as to whether to seek title to the property on the east side of the road (East Property) or to pursue damages, and his ultimate decision to pursue both, resulted in a situation where an adequate case was not made for any remedy. For example, it appears that Cummings surprised his own counsel at trial by testifying that he was seeking damages, as opposed to asking for title-to the East Property. This reversal in position may have contributed to Cummings’ failure to present an adequate case for damages against any party.

Northern Title’s missteps began with preparing a legal description that was incorrect. The realtor, Dorothy Julian, claims to have told Northern Title at the outset that the property being sold was strictly on the west side of the road. Northern Title prepared a legal description including Stephens’ East Property, as well as two pieces of property that Stephens did not own. When the error was called to Northern Title’s attention, it prepared a new legal description that excluded the two parcels Stephens did not own but failed to exclude the East Property. It is hard to fathom how the second blunder could have occurred. Nevertheless, the closing took place with the second incorrect legal description.

To compound the problem, when Stephens discovered about a month later that he had conveyed the East Property to Cummings, he notified Northern Title. Without providing effective notice to Cummings or obtaining his approval, Northern Title unilaterally amended the deed to exclude the East Property and rerecorded the deed. An escrow agent must act in an even-handed, impartial manner. Indeed, the escrow agreement specified:

Escrow Agent is not the agent of any single party. Rather, Escrow Agent agrees to prepare documents, secure the execution of documents, record documents, disburse funds, and otherwise close the transaction in the accordance with the joint directions of the parties. Escrow Agent has no other duties or obligations.

Further, an escrow holder “cannot be the agent of only one of the parties.” Foreman v. Todd, 83 Idaho 482, 485, 364 P.2d 365, 366 (1961). An escrow agent “is empowered to aid neither [party], being merely the conduit used in the transaction for conveyance and safety. He may, therefore, be looked upon as a special agent of both parties, with powers limited only to those stipulated in the escrow agreement.” Id. at 486, 364 P.2d at 366 (quoting 19 Am.Jur., Escrow, sec. 13, p. 430).

In considering Northern Title’s conduct in this regard, the district court ruled:

Failing to get Cummings’s authorization prior to altering the legal description and rerecording a warranty deed containing a legal description that was altered from the title commitment legal description that the parties had agreed upon constitutes gross negligence, willful misconduct, or both. There was not the slightest degree of care shown when Northern Title rerecording the warranty deed.

The district court therefore held, and I believe, correctly, that Northern Title was liable to Cummings for breach of contract.

The district court declined to award breach of contract damages to Cummings based on a lack of proof of damages. Cummings did not appeal that ruling. However, in its cross-appeal Northern Title listed as an issue: “Whether the district court’s finding of gross negligence and willful misconduct against Northern Title should be reversed, where the Escrow General Provisions authorize Northern Title to record a correction deed that comported with the realtors’ instructions.” It should be first observed that the escrow agreement did not provide for recording a correction deed based on instructions from any realtor. No realtors were party to the escrow agreement and the escrow agreement clearly called for “joint directions of the parties.” This Court’s opinion did not grant the requested relief to Northern Title on this issue and, therefore, it did not prevail on one of the issues raised in its cross-appeal. Thus, the district court’s finding of “gross negligence, willful misconduct, or both” effectively stands.

Although the district court did not include a title insurance policy issue in its breach of contract finding, in my view that is the more egregious conduct. Northern Title was the agent for the title insurance carrier. It agreed that it would procure a title insurance policy for Cummings covering the agreed-upon (and incorrect) legal description. However, the title policy was not issued to Cummings until eight months after closing. The policy did not cover the legal description agreed upon for closing but, rather, the legal description that Northern Title placed in the rerecorded deed without Cummings’ knowledge or approval a month after closing. Consequently, Cummings had no basis to make a claim against the title policy. By delaying the issuance of a title policy and then issuing a policy that did not conform with the escrow agreement, Northern Title greatly complicated Cummings’ ability to obtain redress. Had Cummings learned of the problem seven months earlier, he might have been more inclined to pursue the most appropriate remedy — rescission.

Northern Title’s fumbles and misconduct laid the groundwork for this case. Unfortunately, the district court was unable to award damages for Northern Title’s breach of contract because Cummings did not present appropriate evidence to establish his damages stemming from that breach. As noted in the Court’s opinion, no other evidence made its way into the record regarding other potential damages caused by Northern Title. Those deficiencies cannot be remedied by this Court on appeal. However, we can deny attorney fees and costs to Northern Title, based on the waiver provision in the escrow agreement and its partial failure of success on its cross-appeal.